WTI rises despite Chinese economic woes

• WTI trades near $80.00 after jumping to a daily high near $80.80.
• The fragile Chinese economic situation limits upside potential. Economic support may favour Oil prices.
• Hawkish Jerome Powell may also limit the upside.

The West Texas Intermediate (WTI) climbed back above $80 at the start of the week. Still, its upside is limited due to the Chinese economic situation and investors placing bets on a more aggressive Federal Reserve (Fed). On the upside, markets monitor potential supports that the Chinese government may take.

Investors assess the Chinese situation and Powell’s words on Friday

Oil prices managed to maintain momentum despite Chinese economic woes. The real-estate sector remains fragile while the Evergrande’s stock plummeted more than 80%. In that sense, what is boosting Oil prices is the potential Chinese action to support and bolster the local economy. 

On the other hand, the black gold may see further downside as Chair Powell stated that he is looking for the US economy to cool down and that the bank will maintain rates until inflation shows concrete evidence that it is decelerating.

In line with that, World Interest Rates Probabilities shows that markets are currently discounting a 90% probability of a no hike in the forthcoming Sep 20, 2023 meeting. Moving forward, the likelihood of a 25bps hike stands at 70% in November. This anticipated rate hike trajectory would result in a target rate of 5.75%. It is worth noticing that higher rates cool down economies, lowering the demand for energy and, hence, applying downward pressure on Oil prices.

 WTI Levels to watch 

 The daily chart analysis suggests a neutral to bullish outlook for WTI, with the bulls gaining strength, although challenges persist. The Relative Strength Index (RSI) indicates positive momentum with an ascending slope just above its midline, while the Moving Average Convergence (MACD) presents lower red bars. Additionally, the pair is below the 20-day Simple Moving Average (SMA), but above the 100 and 200-day SMAs, highlighting the continued dominance of bulls in the broader perspective.

 Support levels: $79.80, $78.20, $77.70 

 Resistance levels: $81.15 (20-day SMA), $82.00, $82.50

 WTI Daily Chart