Crude Falls Below Support Levels

Oil prices fell again on Tuesday as the fallout from China’s rate cuts continued and there was further algorithmic selling. The market was already concerned about the strength of its demand for crude and the rate move exacerbated that. Commodities are generally lower this week. The stronger US dollar (USD index +0.2%) also weighed.

• WTI fell 1.2% to $77.47/bbl and has started today slightly lower at $77.40. It had trended higher until the London morning and then moved down reaching a low of $76.40, below support at $77.55 and $76.95. Key support is at $72.23.
• Brent is down 1% to $81.58/bbl after falling to $80.51, below support at $81.60 opening $79.32. Initial resistance is at $87.95, July 5 high. The relative strength index is signalling that oil is now oversold, according to Bloomberg.
• Bloomberg reported that US crude inventories fell 3.86mn barrels last week, according to people familiar with the API data. Gasoline fell 2.77mn and distillate 1.5mn. The official EIA is released later today and if it also shows a drawdown that would be the fourth in a row.
• Wildfires in Alberta are now threatening around 10% of the region’s oil output. According to Alberta Energy Regulator data around 388kbd of oil and 13.4kbd of natural gas are within 10km of the fires. There have been some evacuations from oil sands facilities.