Crude Oil Backtracks Amid Slowdown Fears

Crude Oil Backtracks Amid Slowdown Fears
One day after recovering following the Memorial Day holiday weekend, crude oil futures retreated Wednesday.

One day after recovering following the Memorial Day holiday weekend, crude oil futures retreated Wednesday.

West Texas Intermediate (WTI) crude oil for July delivery settled at $58.81 per barrel, reflecting a 33-cent loss for the midweek session. The WTI peaked at $59.09 and bottomed out at $58.78.

As a Bloomberg article posted to Rigzone earlier Wednesday states, oil futures continued to decline as trade tensions between the United States and China appear to be growing. That, in turn, is prompting analysts to anticipate a slowdown in global economic growth – and slackening oil demand.

Steve Blair, senior account executive with the RCG Division of Marex Spectron, remarked that volatile price movements have been particularly present in the oil market lately.

“July WTI has had a wild ride” over the past week, observed Blair. He explained that the WTI price structure, along with other commodities and the equity markets, has collapsed. The far right side of a daily chart provided by Blair’s firm shows the recent WTI collapse.

“From the technical perspective, the last four days has seen the market penetrate the major support at $58.60 and come close to the next support at $56.57 before rebounding and closing back above the $58.60 level,” Blair said. “The market should continue to trade in a wide range from the $56.57 level and potentially back to resistance at the $60.76 level.”

Also finishing lower Wednesday was the July Brent contract, which lost 66 cents to settle at $69.45 per barrel. Like the WTI, the Brent has experienced considerable volatility as well recently, Blair noted. He pointed out that prices penetrated below and closed below the $68.34 support level late last week.

“Since then the market tested the $66.94 support and has since rebounded and returned back into the congestion range between the $68.34 and $70.35 levels, where it remains,” said Blair. “This congestion range remains a good range to trade back and forth until such time as prices either breakout above or breakdown below the support or resistance levels.”

Reformulated gasoline (RBOB) also declined Wednesday. The June RBOB contract lost one cent to settle at $1.945 per gallon.

“With June futures about to expire on Friday, we turn attention to the July contract,” said Blair. “July today broke down early in the trading day and once again came close to testing the $1.8725 support level for the third time in the last three trading sessions.”

Blair pointed out that the last two times such a scenario emerged – Wednesday and Friday of last week – prices rebounded back above the $1.9160 level, which has served as both support and resistance the last four trading sessions. The daily chart for July RBOB illustrates recent price movements.

“Look for this market to continue its wild ride as it has, at times, been the leader of the petroleum complex,” commented Blair. “Resistance is seen at the $1.9540 level.”

For Henry Hub natural gas, Wednesday’s price movement was upward. June gas futures added five cents to settle at $2.63.

“The June contract expired today and so we turn attention to the July contract,” said Blair. “July tested major support at the $2.549 level yesterday, and today the market gapped up and above the $2.608 resistance and closed at $2.624.”

Referencing the July natural gas daily settlement chart, Blair noted that minor resistance appears at the $2.666 level and more major resistance at $2.736. He added that further support, below the $2.549 level, is seen at $2.543 and $2.534.


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