Oil down by 3.7% at the lows to around $63 on the day
The bleeding continues for oil and the technical break claimed overnight has been key in driving the latest downside momentum, not helped by a stronger dollar and souring risk tones of course – which is reverberating further in European morning trade.
US futures are down by nearly 1% now while the greenback is posting fresh highs against commodity currencies, amplifying the dour risk mood today.
Some thoughts from earlier in the day and where oil is headed for now:
The shift in the technical picture adds reason for a further dip potentially as demand outlook has been dampened by delta variant concerns.
I don’t see anything changing on the supply front so it is looking like things are going to shape up to be more of a risk trade i.e. trade on the global economic outlook and virus situation over the next few weeks at least.
As things stand, I wouldn’t rule out a further drop to the May lows @ $61.58-70 next and a likely test of the 200-day moving average (purple line).
The structural view is that oil prices should pull higher eventually in the long-run i.e. 12 months from now, but it isn’t wise to be fighting the short-term narrative at the moment.