Oil Slump Deepens On US/China Econ Fears

Crude Pushing LowerOil prices have broken down to fresh four-month lows this week as bearish sentiment continues to build. Crude futures are now down around 25% from YTD highs and look poised for further downside near-term unless we see a major shift in the backdrop.US Crude Inventories BalloonOn the one hand, the passing of anticipated risks around the Israel-Hamas conflict have weighed on crude prices. Additionally, growing fears over the health of the US and Chinese economies have also exerted downside pressure on crude sentiment. Weaker-than-forecast US jobs figures at the start of the month, along with a big drop in October inflation have strengthened the view that the US economy is cooling down. Data from the EIA this week recorded a massive build in US crude stores of 13.9 and 3.6 million barrels over the last two weeks, pointing to flagging demand. With US crude production still surging to record highs, the near-term outlook remains bearish for crude.China Economic FearsIn China, a series of weaker data points over recent weeks have raised fresh concerns over the health of the post-pandemic recovery. With serious risks linked to the ailing property sector, the demand outlook has weakened materially, fuelling a heavy unwinding of crude longs. Against this backdrop, crude looks likely to continue lower for now until the market finds some equilibrium or the current market narrative shifts.Technical ViewsCrudeThe sell off in crude has seen the market breaking down several key support levels over the last month. Price is now testing the 72.61 level and with momentum studies bearish, the focus is on a further move lower and a test of the 66.79 level next. To the topside, bulls need to see a move back through 82.59 to alleviate bearish pressure.