An early bounce in oil today has been completely snuffed out.
WTI crude is down $3.50 per barrel to $96.05 after falling as low as 95.65.
Oil is testing a zone of technical support that runs from $95 down to $92. The lower end is the confluence of the April low combined with the 200-day moving average. That should attract some buyers, especially given sharply-oversold short-term conditions.
On the fundamental side, not much has changed but the market is increasingly fearful of a recession.
After yesterday's slump, Goldman Sachs reiterated a bullish stance, nothing tight timespreads:
Front-month Brent timespreads, diesel and gasoline cracks all weathered the fall in flat price, only down slightly on the day. In fact, the most notable move in oil prices in the past few days was the strength in crude timespreads and physical prices, reflective of a market still in deficit. This is consistent with our tracking of oil fundamentals, with an estimated global c.1 mb/d deficit in June, with China back to drawing inventories as well. [ . . . ]
While the odds of a recession are indeed rising, it is premature for the oil market to be succumbing to such concerns. The global economy is still growing with the rise in oil demand this year set to significantly outperform GDP growth, buttressed by the post-COVID re-opening in Asia-Pacific as well as the resumption in international travel
They noted that seasonally-low liquidity might have hurt:
As is repeatedly the case with oil, the move lower was then exacerbated by technical factors and trend-following [Commodity Trading Advisor] flows, such as Brent trading through its 100-day moving average, as well as through the strikes of puts with large open interest (where negative gamma effects invariably accelerate large price sell-off). It is important to finally note that this sell-off occurred amidst seasonally low post-July 4 trading liquidity. From this perspective, this sell-off in oil prices is not all that surprising, similar in set-up and magnitude as the one after Thanksgiving 2021, most recently.
