Asset classes are going their own ways now regarding their assessment of the risks of the Delta-variant. Oil markets continued falling overnight as energy markets fret about future consumption patterns caused by Delta-variant restrictions, actual or threatened, just as OPEC+ starts ramping up monthly production. The cases cropping up in China are a genuine concern. If they spike markedly, resulting in inevitable firm action from the government, we can expect oil prices to reflect that reality.
Brent crude closed below its 100-day moving average (DMA) overnight at $69.80 a barrel, finishing 1.50% lower at $69.20. WTI closed below its 100-DMA at $67.30 a barrel, falling 1.70% to $68.00 a barrel. Today’s return of Japan and Singapore markets saw some bargain hunting occurring from physical buyers, which lifted Brent crude and WTI by 0.65%, respectively, to $69.65 and $67.25 a barrel. Today’s rally was much weaker in scope compared to the falls overnight, and oil’s technical picture remains fragile.
Overnight, both contracts fell quite a bit further intra-day than the daily closes suggest. Notably, Brent crude and WTI traced out double bottoms on the daily charts at $67.50 and $65.00 a barrel, respectively. These levels form the first critical support line for both contracts, with failure $65.00 for Brent crude and $62.50 a barrel for WTI.
Resistance lies at the respective 100-DMAs, which today were at $69.90 for Brent crude and $67.30 a barrel for WTI. While Delta concerns remain elevated; further gains will likely be limited to $72.00 and $71.00 a barrel.
With sentiment fragile, tonight’s US API Crude Inventories could negatively affect prices if inventories rise sharply. The API data is often ignored by markets in favor of the official numbers that come out tomorrow night NYT. But when the data is running with the market sentiment wind behind it, it can often blow the boat onto the rocks.