Crude turns lower
On the first Tuesday of this month, when traders returned after the long US Labor Day weekend, front-month WTI slumped below $65 per barrel to hit its lowest level since May 2023. This proved to be the culmination of a 23% decline which began in early July. Oil was very oversold, and prices subsequently turned higher, but not aggressively so. In fact, it took a fortnight for WTI to get back above $72 for a total gain of 11%. Two days after this most recent high, crude is back below $68, for high-low swing of over 7%. In other words, it has taken just two days to wipe out over 60% of the gains which took two weeks of grind to build. As with most things in life, it’s so much easier to knock something down than to build it. Now crude is in an interesting juncture. Could this just be a straightforward correction ahead of a more protracted, and larger, turn higher? Or is it the first leg in the resumption of a bear market? It appears that Saudi Arabia’s decision to ramp up production and abandon its $100 price target triggered the latest sell-off. But it also seems apparent that as far as oil traders are concerned, there’s zero belief that China’s proposed stimulus measures announced earlier this week, will do much to bolster the country’s ailing economy.
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