Market alert: Crude oil prices fall as market backwardation weakens ahead of OPEC report, EIA data
WTI and Brent crude oil prices dip after a bright start to the week as traders assess market and a potential deal between Washington and Tehran may see Iranian oil return to the market.
WTI and Brent crude oil prices are shifting lower through Asia-Pacific trading, with the benchmarks tracking around 0.10% lower following a strong open to the week. A better-than-expected Chinese trade surplus for July reflected strong external demand that helped cool recession fears. China also imported more oil compared to June, but still less than in the same period last year.
A draft text to restore the 2015 US-Iran nuclear deal was finalized early this week following several rounds of stalled negotiations over the past year and a half. If Washington and Tehran agree to the terms laid out in the draft, this could see the removal of sanctions on Iran, including oil exports. Iran would likely be able to supply upward of 1 million barrels per day, although no specific timeline is known. Overall, a deal would likely pressure oil prices on the additional supply.
Meanwhile, oil traders are awaiting inventory reports from the American Petroleum Institute and the Energy Information Administration. Analysts see the EIA reporting a 400k barrel decrease in crude oil stocks for the week ending August 5. Later this week, the Organization of the Petroleum Exporting Countries (OPEC) will release its monthly Oil Market Report (MOMR). The US consumer price index, due out this week, has the potential to strengthen Fed rate hike bets if the headline figure beats the 8.7% y/y consensus forecast. That would likely weigh on commodity prices, including oil.
The WTI prompt spread, the difference between the current and next month’s contract prices, is nearing the lowest level since April after falling for four straight weeks. While still in backwardation, it’s a bearish signal for the commodity. The 1:1 RBOB/CL crack spread, a theoretical gauge for refiners’ margins, has also seen considerable downside. Altogether, bearish signs but ultimately inventory levels and broader macroeconomic indicators, including the OPEC report, is more likely to drive price action.
WTI crude oil technical outlook
WTI oil prices are in danger of breaking below the 90 psychological level as losses pickup through APAC trading. That would expose the 61.8% Fibonacci retracement level, which defended several intraday attempts to push lower. Alternatively, if prices hold the 90 level and rebound, the falling 20-day Simple Moving Average (SMA) would come into focus as a potential target.
WTI crude oil daily chart
This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.
Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.
Start trading forex today
Trade the largest and most volatile financial market in the world.
- Spreads start at just 0.6 points on EUR/USD
- Analyse market movements with our essential selection of charts
- Speculate from a range of platforms, including on mobile
Live prices on most popular markets