WTI struggles below $75.00 as China fears battle USD pullback

• WTI remains indecisive around, fails to extend the previous day’s rebound.
• China factory activity shrank for the first time in 19 months, Evergrande fears escalate as well.
• US policymakers avoid government shutdown but deadlock over debt ceiling, stimulus prevail.
• China headlines, Fedspeak important for fresh impulse, US data should also be observed.

WTI crude oil remains sidelined around $74.60 as European traders brace for Thursday’s task. In doing so, the energy benchmark struggles for a clear direction amid mixed catalysts.

While the risk-on mood and the easy US dollar joins the hopes of economic recovery to anchor the bullish hopes, fears over China’s economic transition from the pandemic and Evergrande headlines tame the upside momentum. Also, concerns surrounding the Fed tapering and an end to the virus-led emergency aid packages in many countries exert additional downside pressure on the black gold.

Risk appetite improves as the US policymakers manage to avoid the government shutdown with stop-gap funding. Also on the positive side is the news of AstraZeneca’s covid vaccine showing 74% efficacy in the large US trial seems to have underpinned the latest hopes of overcoming the Delta covid crisis.

However, the first below-50 print by China’s NBS Manufacturing, for August, joins power cuts and Evergrande headlines to keep a tab on the market sentiment. Also, the final battle over the US infrastructure bill and a multi-billion-dollar debt ceiling extension are still looming and challenge the optimists.

It’s worth noting that the official weekly inventories from the Energy Information Administration (EIA), 4.578M versus -1.652M expected and -3.481M prior, also become the toll on the black gold.

Even so, hopes of economic recovery from the pandemic and supply disruption in the Gulf add to the bullish catalysts for the WTI oil prices.

Looking forward, US policymakers’ struggle in the Senate and news concerning China’s economic moves, as well as Evergrande, will be important to determine immediate oil moves.

Technical analysis

Unless breaking an ascending support line from August 23, near $73.30, WTI remains directed to the north. That said, $75.80 guards immediate upside before the October 2018 peak surrounding $76.80.