🛢Oil prices extend decline📉

For the second day in a row, the oil market has seen a sharp pullback. The price of WTI fell again today by nearly 3% below the level of $ 70 per barrel, which is the lowest level in almost 2 weeks. What could be behind these strong declines?

The spreading Delta variant of the coronavirus dominates the narrative. Over the past 24 hours, a lot of attention has been paid primarily to the situation in China, where the number of cases is growing rapidly. As reported today by the Washington Post, Chinese authorities have taken decisive action in the city of Wuhan. Flights, train travel, and sports matches were suspended. A program of mass testing of citizens was also announced. Although the number of new cases is not high, numerous media reports that this time around, an increase in new infections is observed in more than 35 cities in 17 Chinese provinces (out of 33 provinces). It is worth remembering that these cities often have a population of several million inhabitants. This raises concerns about the demand for crude oil. Without a doubt, in the coming days, the attention of the markets will be focused on the epidemiological situation in China and the actions of the local authorities. The anxiety related to the future economic growth and the demand for commodities is also visible in the copper market, the price of which is also falling today by nearly 2% (China accounts for over 50% of the global demand for copper).

From a technical point of view, buyers managed to halt declines around the 50% Fibonacci retracement of the upward wave initiated on July 20. Currently, price attempts to bounce back from daily lows is testing the $ 70 per barrel. Should a break higher occur, investors will focus on a 38.2% Fibonacci retracement (around $ 70.55), which could act as a major resistance. On the other hand, if sellers will manage to regain control and break below the aforementioned 50% retracement, then the downward impulse may accelerate towards the 61.8% retracement (around $ 68.35).

OIL.WTI, H1 interval. Source: xStation5