Crude prices slid further in Asian trade yesterday as markets reacted to falling consumer confidence in the US, analysts said.
New York’s main futures contract, light sweet crude for delivery next month, was down US$1.01 to US$66.50 a barrel in afternoon trade from its close on Friday.
Brent North Sea crude for October delivery fell US$0.79 to US$70.65.
PHOTO: REUTERS
Prices continued moving downwards as data released by the University of Michigan on Friday showed an unexpected fall in consumer sentiment, which spooked the commodities and equities markets, analysts said.
“The report showed a drop in consumer confidence and that weighed on the oil market. The oil market was also pressured by the falling stock markets,” said Victor Shum, senior principal of Purvin and Gertz energy consultants in Singapore.
The report said that its consumer sentiment index dipped to a preliminary 63.2 from 66 this month, confounding most analysts who had expected it to rise to 69 and raising further red flags on consumer spending, the main driver of the US economy.
Shum said weak oil fundamentals would continue to put a peg on crude prices.
“Given the very weak oil market fundamentals, the mid-60s to high-60s is about the right range. The path of least resistance is down,” he said.
Crude oil may drop to test a support line around US$63 a barrel in New York should it fail to reach two key targets above US$74, a technical analysis by Commerzbank AG said.
Oil has failed to re-attain this year’s high of US$73.23 a barrel reached on June 11. A fresh rally will be capped in a range between US$74.54, the 200-week moving average, and US$76.28, a critical level using so-called Fibonacci analysis, Commerzbank said.
Failure to breach these points may send crude plunging toward a support line connecting the lowest prices of the past six months, the bank said.
“We would allow for probes into this key overhead resistance band, but would again allow for initial failure,” Commerzbank analyst Karen Jones said in a report on Sunday. “Failure here would once again cast attention back to support offered by the six-month uptrend.”
Crude futures for delivery next month traded around US$70 a barrel on the New York Mercantile Exchange last week. The six-month trend-line indicates oil would be supported against further losses at US$62.94 a barrel, the bank said.
“A close above the US$76.28 resistance would be significant as this would imply resumption of the longer term bull move to US$90,” Jones said, adding that this scenario was “not favored” in her estimates.
A level of US$76.28 a barrel corresponds to a 38.2 percent retracement of oil’s collapse from its record of US$147.27 in July last year to US$32.40 in December. The significance of this 38.2 percent move comes from the ratios between numbers in the Fibonacci sequence, used by traders to predict points of resistance and support.
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