Crude Pulling Back Over China Economic Fears

Oil Under PressureOil prices have pulled back sharply this week with crude futures dropping around 5% from last  week’s YTD highs. The driver behind the current weakness has been an uptick in concerns over the health of the Chinese economy. A string of recent data weakness out of China has underscored economic concerns while recent measures taken by authorities to help support the Chinese economy appear to have fallen short so far.China Economic FearsThis week, markets have been grappling with news that one of China’s biggest property developers, Country Garden Holdings, is on the brink of collapse. This comes alongside news of another major asset manager has failed to make payments due on high yield products. With Chinese stock coming under heavy selling pressure the Chinese regulator has today instructed several large mutual funds to refrain from being net-sellers of equities in a bid to help stem the declines.Weaker Oil Demand Outlook – EIA NextWith economic fears gathering, the oil demand outlook has softened, translating into the softer prices we’re seeing this week. Looking ahead today, focus will shift to the US with the latest EIA inventories data due. The market is forecasting a fresh drawdown of 2.4 million barrels which should help underpin prices somewhat. A surplus reading would be firmly bearish at this point given the backdrop.Technical ViewsCrudeCrude prices have reversed back under the 82.59 level this week following the breakout last week. While below here, risks are skewed towards a deeper drop down to 72.61 next, in line with bearish momentum studies readings. To the topside, back above 82.59, 93.47 is the next level to note.