The oil price has slumped recently, but there is still some potential bearish room below.
USOIL – Daily Chart
The price of USOIL has slumped after hitting the $82.50 level, and traders can look for further lows to the $67 and $64 levels.
Oil rallied from recent lows into April after OPEC announced a production cut. However, the price has since slumped as traders look at slowing economic growth.
US Crude slipped below $70 to mark new five-week lows at $69.70 per barrel, while Brent Crude dropped to $73. Prices are now at their lowest levels since March and saw their largest one-day percentage decline since January.
The Federal Reserve added bearishness to crude prices with another interest rate hike. The Fed’s 25 basis point hike marked a tenth-consecutive rate move higher.
Meanwhile, Chinese manufacturing activity added to fears of a slowdown. China is the world’s largest energy consumer and the single-largest top buyer of crude oil. Traders have been disappointed by a slower-than-expected recovery in the country.
Crude Oil Forecast
OPEC is confident of a demand surge later this year, with oil markets boosted by the cartel’s recent production cuts. However, the short-term is being driven by macroeconomic trends.
The latest fall in oil came despite the Energy Information Administration reporting another weekly inventory draw on crude oil inventories. That report came out a day after the American Petroleum Institute estimated inventories had shrunk by almost 4 million barrels. The EIA estimated stocks had dropped 1.3 million barrels in the same period, compared with a draw of 5.1 million barrels the previous week.
The economic outlook could continue to take its toll on crude with the backdrop of the US debt ceiling also a threat to risk assets.
