Crude oil prices lick wounds after another aggressive sell-off. Brent slipped below the $69 figure for the first time since April and struggles to get back above $70 on Tuesday as concerns over a weaker global demand still prevail in the market.
The recent decline in prices was fuelled by dollar rally. The American currency is on the rise due to monetary policy divergence coupled with the issues on Brexit and Italy’s budget. And the prevailing risk aversion only adds to the selling pressure in commodities.
On Monday, Saudi Arabia announced crude oil production cut by 500K barrels per day starting from December. But this was not enough to fuel a sustainable rally as traders continue to focus on demand prospects amid signs of slowing global growth.
Technically, Brent needs to get back above the $70 threshold in order to see a weaker selling pressure. To do this, the market needs a more sustainable improvement in risk sentiment along with a healthy USD correction.
The immediate risk event for the market is API report due later today. Further increase in crude oil stockpiles will limit the recovery potential.