⛽WTI at highest level since November!

Oil dropped hard following a release of disappointing trade data from China yesterday, which showed weakness in both foreign and domestic demand. Data also showed Chinese oil imports in July dropping to the lowest level since January, dropping 18.8% YoY to 10.29 million barrels per day. This is a noticeable drop given that record imports were reached as recently as in May above 17 million bpd.

Even with a slight decline in demand in China in the coming months, this year will be a record-breaking one for China in terms of oil demand. Additionally, OPEC+ is keeping supply tight, and a deficit of around 1.5-2.0 million barrels per day is expected in the second half of the year. Such a deficit led to a surge in prices to $150 per barrel in 2007-2008 period. Of course, it's important to remember that now deficit results from a decision to limit supply.

WTI is breaking above local highs from April when OPEC+ announced production target cuts for the first time this year. Now, the production reduction has a tangible impact on market fundamentals. Oil is trading at its highest level since November, which is a warning signal indicating that energy prices will have a positive impact on year-end inflation, precisely in November and December, if prices remain at current or higher levels.

WTI (OIL.WTI) broke above the local high from April and the next resistance levels in-line can be found in the $85 area, where the 38.2% retracement can be found, as well as near $87 per barrel mark. Source: xStation5