Oil News: Crude Prices Rebound but Bearish Trends Persist Amid Mixed Signals

Oil Prices Edge Higher After Plunge Amid Mixed Economic Signals

Light crude oil futures are rising on Friday, recovering from a significant drop in the previous session due to concerns over the U.S. economy. Despite recent volatility, the market remains rangebound, with support at the 200-day moving average of $75.77 and resistance at the 50-day moving average of $77.96.

At 09:49 GMT, Light Crude Oil futures are trading $76.63, up $0.32 or +0.42%.

Market Trends and Economic Indicators

Oil prices are experiencing a modest increase on Friday but are on track for a fourth consecutive weekly decline. This trend is driven by disappointing global fuel demand growth, overshadowing fears of supply disruptions due to escalating Middle East tensions. Both Brent and U.S. West Texas Intermediate (WTI) crude futures have declined over 7% in the past four weeks, marking the longest streak of weekly losses this year.

Impact of Weak Economic Data

Disappointing economic data from China, the world’s largest oil importer, alongside weaker manufacturing activity across Asia, Europe, and the U.S., raises concerns about a tepid global economic recovery. This scenario poses a threat to oil consumption. China’s falling manufacturing activity, combined with lower imports and refinery activity in June compared to the previous year, exacerbates these concerns. In July, Asia’s crude oil imports hit a two-year low due to weakened demand in China and India, according to LSEG Oil Research data.

OPEC+ Policy and Supply Concerns

OPEC+ recently maintained its oil output policy, including plans to start unwinding some production cuts from October. This decision could keep supply levels stable. Despite geopolitical tensions in the Middle East, actual supply disruptions have been minimal, keeping prices relatively unaffected. However, the market remains vigilant about potential disruptions, especially in vital oil shipping lanes affected by Iran-aligned militant activities.

U.S. Economic Signals and Market Reaction

In the U.S., robust export demand has led to a decrease in weekly crude oil stockpiles by 3.4 million barrels, according to government data. However, weak U.S. factory data and concerns over the Federal Reserve’s interest rate policies have weighed on market sentiment. Investors are closely monitoring the U.S. non-farm payrolls report, which is expected to show a slowdown in job creation, potentially signaling a weaker labor market and influencing future Fed rate decisions.

Oil Prices Forecast: Bearish Outlook

Given the mixed economic signals, weak global demand, and potential for supply stability, the short-term outlook for oil prices appears bearish. Despite temporary price increases due to geopolitical tensions, the overarching demand concerns and the possibility of further economic slowdowns are likely to exert downward pressure on crude oil prices. Traders should remain cautious and monitor economic indicators closely for further market direction.

Technical Analysis

Light crude oil futures are up on Friday, straddling a pivot at $76.89 as traders wait for the next catalyst to drive the price action.

Without fresh news to move the market, traders may become content to hold prices inside the range created by the 50-day moving average at $77.96 and the 200-day moving average at $75.77.

The price action suggests the market has become more data dependent than technically driven.