Oil takes a hit as recession and Covid fears loom

The German ZEW was the latest report to send recession fears through the commodities markets, knocking Crude Oil $7 lower, back below the psychological $100 level in WTI Crude Oil. The headline print was -53.8 vs an expectation of -38.3 and a June print of -28. This was the lowest level since December 2011. The Current Conditions component of the ZEW for July was -45.8 vs -34.5 expected and -27.6 in June. The ECB will be raising rates at its July meeting, it is just a question of “by how much?”. At the last ECB meeting, the Committee committed to a 25bps hike, however some are speculating it may be 50bps. Worse data combined with rate hikes are leading to fears of a slowdown throughout Europe, which would decrease the demand for oil. Lower demand means lower prices.

What are economic indicators?

The other main factor causing lower oil prices recently is the continued fluidity of the coronavirus situation in China. China continues to maintain a zero-Covid policy. Therefore, China continues to lockdown cities when Covid cases are on the rise. Many areas in Shanghai have gone back under lockdown or placed under restrictions, as the city has seen cases rise to the highest level since May. Macau went under lockdown for a week, forcing casinos to close their doors. Even Wungang City is under lockdown for 3 days after just 1 positive Covid case was discovered. These lockdowns are contributing to fears of a global slowdown or even recession.

How to start oil trading

After attempting to test the March 8^th highs, WTI Crude Oil reversed and moved lower. Crude could only get as high as 123.66 on June 14^th. Oil then began falling, and last week it reached a low of 95.13. just beneath the 50% retracement level from the lows of December 2^nd, 2021 to the highs of March 8^th, as well as, horizontal support. Crude then bounced into horizontal resistance near 105.09 and began falling again. Today Crude Oil is testing the recent lows from last week. At the time of this writing, oil is down $7, below 96.50.

Source: Tradingview, Stone X

Trade WTI Crude Oil now: Login or Open a new account!

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore

On a 240-minute timeframe, US OIL has been moving lower in an orderly channel since June 14^th. Crude Oil is approaching last week’s low of 95.09, as well as the previously mentioned 50% retracement level and horizontal support. If price can break lower, then next level is a confluence of support at the bottom trendline of the channel and horizontal support between 92.50/92.96. Below there, price can fall to the 61.8% Fibonacci retracement level from the recently mentioned timeframe at 88.04! However, if support holds, first resistance is at the lows of July 11^th near 100.88. Above there price can move to the July 8^th highs at 105.09, then the top trendline of the channel near 108.00.

Source: Tradingview, Stone X

The German ZEW and the continued on again/off again lockdowns in China are contributing to fears of a global slowdown or recession. As a result, the perception of a lack of demand is causing WTI Crude Oil to move lower. If the recession fears continue, watch for Crude oil to move lower.

Learn more about oil trading opportunities.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.