Crude Continues Fall On Demand Worries, Set To Be Down Sharply In July

Oil prices continued to sink at the start of the week as the market builds expectations of an easing in the market driven by softer demand from China and OPEC easing back on output cuts later in the year. The market looked through escalating tensions in the Middle East and Ukraine/Russia. The stronger US dollar (USD index +0.3%) and weaker risk appetite also weighed. Key for the outlook will be this week’s Fed meeting (Wednesday), US payrolls (Friday) and OPEC review meeting (Thursday).

• WTI fell 1.6% to $75.94/bbl breaking below round number support of $77 and $76 and initial support at $76.04 after it reached a high of $77.69. Yesterday’s sell off has opened up key support at $72.23. It has started today lower again at $75.76 and is now down almost 6% lower this month.
• Brent is now below $80 after falling 1.6% to $79.84/bbl. The benchmark fell to a low of $79.36, just above initial support at $79.32 – a bear cycle is currently in play. Key support is at $76.66. The medium-term trend remains bullish though.
• To reinforce demand worries, US light sweet crude has been trading at a discount for 9 months due to soft demand especially from Asian refiners.
• Venezuelan President Maduro will have another term after disputed elections which may result in a deepening of sanctions and according to Bloomberg is likely to see further stagnation in the oil sector.