Oil prices retreated at the beginning of Monday’s trading after seven consecutive weeks of gains, supported by OPEC+ supply cuts.
This decline coincided with increased concerns about economic recovery in China and the ongoing strength of the dollar. Brent crude prices dropped by around 0.3% to reach $86.52 per barrel, while crude oil prices reached $81.75 per barrel, down about 0.3%.
The International Energy Agency stated on Friday that global oil demand reached record levels in June and is expected to peak again in August, cautioning that price increases are possible, especially given the slowing production from major suppliers like Saudi Arabia and Russia.
Losses in the crude oil markets so far have been limited, especially with the continuation of recent production cuts. While oil prices experienced strong gains over the past two months, they have encountered resistance in recent weeks as markets did not fully absorb the recent oil demand expectations, amid deteriorating conditions in China and the possibility of rising US interest rates.
The dollar has also been a major source of pressure on oil markets recently, with the dollar stabilizing at its highest level in five weeks following higher US inflation readings from the past week.
Data from Friday showed that the Producer Price Index in the United States rose more than expected in July, coming just a day after data showed an increase in the Consumer Price Index in July.
This provides further support for the Federal Reserve to raise interest rates, which in turn bolsters expectations of a stronger dollar and negatively affects oil demand.
During the current week, attention is set to shift to important US retail sales data scheduled for release on Tuesday. Elevated spending could lead to increased inflation.
On the other hand, concerns about China’s economic slowdown and the real estate market crisis, as it is the largest oil importer, have hurt demand in the markets due to a series of weak economic data in the past two weeks. However, the focus will now be on significant US data set to be released on Tuesday.
In the above chart, crude oil prices reached $85 per barrel in the past few days. Indicators signal that the price may have reached a buying peak and is beginning to gather bearish momentum over the long term.
However, the possibilities of an upward movement remain in the short and medium term, as long as the price stays above the support level at $81 per barrel.
A breach and sustained drop below this level on the daily chart could mark the start of a potential downward trend in oil prices, targeting levels of $80 and $78 per barrel, respectively.
On the other hand, if the price breaks through the $83 per barrel level upwards, it could continue to rise, reaching record levels at $100 per barrel. However, this is the less likely scenario.
