WTI Oil prices tumbled to their lowest level in almost four years after the International Energy Agency (IEA) said oil demand will expand this year at the slowest pace since 2009. Yesterday the West Texas Intermediate (WTI) fell below $80 for the first time since June 2012 (fell as much as $2, or 2.45%, to $79.78/bbl on Nymex). Meanwhile Brent futures dropped 4.3 percent to $85.04 a barrel in London and 4.6 percent to $81.84 in New York.
WTI is under a lot of fundamental pressure
There are many reasons behind this oil underperformance. On the one hand, concerns over world growth and the European recovery have grown stronger over the last weeks with disappointing economic data (German industrial production, Chinese GDP…) and traders start to think this is likely to hurt oil consumption for the next years (WTI and Brent consumption). On the other hand, new shale oil supplies boosted U.S. output to the most in almost 30 years while global demand weakens. Eventually, OPEC, which supplies about 40% of the world’s crude, is raising production as each member is competing for market share. “Demand growth is far underperforming supply growth, and the market is adjusting to a new price level,” Greg Sharenow, executive vice president at Newport Beach, California-based Pacific Investment Management Co., who helps manage $26 billion of commodity investments.
WTI looks technically due for a short-term bounce
On a technical perspective, WTI seems to be on its way for a quick bounce supported by short term momentum indicators (Slow Stochastics). First technical resistance for WTI oil lies at 85.61 USD (lows of April 2013) then 87.00 (lower bound of downtrend channel from mid-2013) and 91-91.20 (pre selloff support area). First support at 79.78 (pivotal point) then 77.25 (June 2012 lows), below would risk further downside.
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