By Oil prices moved lower after spending most of the trading session flat on Monday as a strong dollar weighed on sentiments.
Also, fears of supply disruptions from the US abated after Hurricane Rafael was downgraded to a post-tropical storm.
A stronger dollar makes commodities priced in the greenback more expensive for overseas buyers, limiting demand for the commodity.
At the time of writing, the price of West Texas Intermediate crude oil on the New York Mercantile Exchange was $69.33 per barrel, down 1.5%. Brent crude on the Intercontinental Exchange was $72.92 per barrel, down 1.3% from the previous close.
Bearish signals from China
Meanwhile, China’s National People’s Congress on Friday announced a package worth $1.4 trillion to alleviate local government debt issues.
However, the announcement was deemed not sufficient to generate demand from the country and boost the struggling economy.
Warren Patterson, head of commodities strategy at ING Group, said:
Oil prices fell on Friday “along with the rest of the commodities complex after markets were left underwhelmed by China’s debt package, which will help alleviate local government debt and allow them to implement more stimulus measures.
“After Trump’s win in the presidential election, markets were hoping for a larger-than-expected stimulus,” he said.
Separately, China’s crude oil imports remained weak in October as well, falling on a year-on-year basis.
According to Commerzbank AG, China’s oil imports are expected to decline year-on-year for the third time in the last four years.
But, unlike the last couple of times, when demand slipped because of the COVID-19 pandemic, this time it is due to other factors.
“Rather, the weakening of oil imports in China is due to the weaker demand for oil as a result of the sluggish economic development and the rapid advance of e-mobility,” Carsten Fritsch, commodity analyst at Commerzbank, said in a note.
Hurricane Rafael fears subside
Hurricane Rafael in the Gulf of Mexico has been downgraded to a post-tropical cyclone.
Oil prices fell as there is no risk of supply shortage and facilities could return to functioning at required levels.
However, data from the Bureau of Safety and Environmental Enforcement (BSEE) shows that almost 483,000 barrels per day of crude oil production has been shut in.
The production shut in was equivalent to almost 28% of total US Gulf of Mexico production, ING analysts said in a report.
Also, Reuters reported that more than 16% of natural gas production remained offline on Sunday.
Technical price forecast
The WTI crude oil price has a strong support of $69.18 per barrel level, with additional backup at $68,66 per barrel, according to Fxempire.com.
“The 50-day EMA at $71.08 and the 200-day EMA at $70.73 add resistance overhead,” Fxempire.com said in a report.
Overall, the sentiment is bearish below $70.58, but a decisive break above that level could shift momentum to the upside.
For Brent crude prices, support is seen at $72.80 per barrel and $72.19.
“For now, the outlook remains bearish below $74.04, but a break above this level could turn the tide and invite buyers back into the market,” according to the report.
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