WTI Crude Oil Price Falls Below $80, Fails to Ignite Bullish Momentum on China's Economic Stimulus Prospects
The recent performance of WTI crude oil price has been poor, experiencing a decline after a rebound from a two-week low. Concerns over China's economic debt crisis intensified as Evergrande, the second-largest real estate developer in China and the most indebted company globally, sought creditor protection in a US bankruptcy court. This has further exacerbated worries about China as the world's second-largest economy and its economic transformation, dampening bullish sentiment for crude oil. Market focus remains on catalysts such as China-related news and changes in bond yields.
WTI oil price trend remains uncertain, hovering around $79.60 amid risk aversion sentiment, unable to sustain the previous day's rebound. It's worth noting that WTI crude saw its first daily increase in nearly four weeks the previous day, against the backdrop of potential economic stimulus in China and a weakening US dollar. However, the market remains concerned about China's impact as the largest energy-consuming nation on WTI crude's bullish outlook.
According to Reuters, the latest headline news from China reveals that Evergrande, as the second-largest property developer in China and the most heavily indebted company globally, has applied for creditor protection in a US bankruptcy court. This further intensifies concerns about China as the world's second-largest economy and global economic transformation while raising worries about the financial condition of China's largest property developer, Country Garden. Top US banks like JPMorgan and Barclays have recently downgraded their expectations for China's economic growth, further dampening bullish sentiment for oil.
Apart from subdued market sentiment, robust US data has pushed up US bond yields, exerting downward pressure on oil prices. The Philadelphia Fed Manufacturing Index reached its strongest level since April 2022, showing an upward trend for the first time, with the August index rising from -13.5 to 12.0, surpassing expectations. Additionally, the initial jobless claims for the week ending August 11 decreased from the revised 250,000 to 239,000, against an expected 240,000. However, it's worth noting that the four-week moving average of initial jobless claims as of August 4 and the continued jobless claims for the week both showed increases.
US industrial production and retail sales data for July unexpectedly rose, while housing data was mixed. The latest Federal Reserve meeting minutes indicated a leaning towards addressing inflation concerns despite divisions on impending rate hikes, enhancing market expectations of a shift in Federal Reserve policy, favoring the US dollar. The People's Bank of China released its monetary policy report for the second quarter, expressing a firm commitment to prevent excessive adjustments in the renminbi exchange rate, following China's previous pledge to take more stimulus measures to avoid an economic downturn.
Against this backdrop, US stocks declined once again, with the yield on the 10-year Treasury note approaching levels seen in 2007. It should be noted that high yields have triggered concerns about a global economic recession, impacting risk assets such as stocks and commodities. Looking ahead, economic events may prompt WTI crude traders to closely monitor additional catalysts to find clearer direction.
From a technical analysis perspective, WTI crude oil failed to break above the 21-day exponential moving average near $79.90 in the daily closing price and encountered resistance at $80.00. Even though WTI oil rebounded around $78.80, bearish pressure remains.
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