Oil News: Prices Set for Third Weekly Decline Amid Mixed Economic Signals

Oil Prices Set for Third Weekly Decline

Oil futures are trending lower on Friday, consolidating weekly losses as traders struggle to maintain upward momentum. The market’s near-term direction appears to be influenced by the 50-day moving average, which is likely to set the tone for today’s close.

At 10:23 GMT, Light Crude Oil Futures are trading $77.81, down $0.47 or -0.60%.

U.S. Economic Growth Surpasses Expectations

The U.S. economy grew at an annualized rate of 2.8% in the second quarter, surpassing economists’ predictions of 2.0%. This stronger-than-expected growth, coupled with easing inflation pressures, has bolstered expectations for a potential Federal Reserve interest rate cut in September. Lower rates typically stimulate economic activity, potentially boosting oil demand.

Asian Economic Concerns Limit Gains

Despite positive U.S. data, concerns about economic conditions in Asia’s largest economies have capped oil price gains. In Japan, core consumer prices in Tokyo rose 2.2% year-on-year in July, raising expectations of a near-term interest rate hike. However, an index excluding energy costs showed the slowest annual increase in nearly two years, indicating moderating price hikes due to soft consumption.

China’s Monetary Stimulus Efforts

China, the world’s largest crude importer, conducted an unscheduled lending operation at significantly lower rates on Thursday. This move suggests authorities are implementing stronger monetary stimulus to support the economy. However, data showed China’s apparent oil demand fell 8.1% to 13.66 million barrels per day in June, raising consumption concerns.

Gaza Ceasefire Hopes Pressure Oil Prices

Expectations of a potential Gaza ceasefire deal have added pressure to oil prices by easing Middle East tensions and associated supply concerns. U.S. officials believe parties are closer than ever to agreeing on a six-week ceasefire in exchange for the release of hostages by Hamas.

Market Forecast

The oil market outlook appears bearish in the short term. With prices on track for a third consecutive weekly decline and persistent concerns about Chinese demand, downward pressure is likely to continue. However, potential production disruptions from Canadian wildfires and a large U.S. crude stocks draw may provide some support to prices.

Technical Analysis

The early price action on the daily Light Crude Oil Futures chart suggests the direction of the market hinges upon the reaction to the 50-day moving average at $78.05.

A sustained move over the 50-day MA will signal the presence of buyers with $79.42 the nearest intraday target.

On the flipside, a sustained move under the 50-day MA will be perceived as weakness with the first target $76.89.

The daily chart pattern also suggests the market could be moving into “rangebound” territory with the 50-day MA at $78.05 providing resistance, and the 200-day MA at $75.89 providing support.