Oil prices are taking a hit at the beginning of a new week. Both Brent (OIL) and WTI (OIL.WTI) are trading over 3% lower on the day. The most likely reason behind the drop is the still deteriorating pandemic situation in China. Lockdown imposed in Shanghai, a major industrial hub in the country, failed to curb spread of the coronavirus with the city continuing to report more and more new daily cases. Given China's zero-tolerance policy when handling the pandemic, such developments do not paint a bright picture as they hint that restrictions will be in place for long. Restrictions impact economic activity in the country and it has a negative impact on oil demand. Another piece of evidence on Chinese economic struggle was offered by South Korean exports data today. While overall South Korean exports jumped 17.7% YoY in the first 10 days of April (workday adjusted), exports to China were 3.4% YoY lower. This is quite uncommon and is said to be another sign of Covid-induced slowdown in China.
Taking a look at Brent chart (OIL) at the H1 interval, we can see that price took a dive lower after a repeated inability to break above the resistance zone ranging in the $103.40 area. Price dropped below the lower limit of a short-term trading range at $100 per barrel today and is currently lows from Thursday, April 7. Key support zone to watch should declines continue to deepen can be found in $97.70 area, marked with previous price reactions as well as the lower limit of a downward channel.
Source: xStation5
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