WTI Price Analysis: Oil falls after PBOC decision

• WTI fell to a five-day low of $69.82, with losses of more than 1.50%.
• The PBOC rate cuts stoked concerns about energy demand among oil traders.
• World indices fell after the decision, signaling negative sentiment in the markets.

On Tuesday, the barrel of West Texas Intermediate (WTI) It fell to its lowest level in five days and then stabilized at $70.30 as rate cuts announced by the People’s Bank of China (PBOC) stoked concerns about the economic health of the world’s largest oil importer. In addition, US, German, British and Japanese stocks are falling, indicating negative market sentiment on fears of a global economic downturn.

PBOC rate cuts fuel fears of a global economic downturn

During the Asian session, the People’s Bank of China announced a 10 basis point (bp) drop in prime lending rates. Thus, the one-year prime interest rate dropped from 3.65% to 3.55% and the five-year prime interest rate from 4.30% to 4.20%. This decision served to remind investors of the sluggishness seen in Chinese economic activity. In that sense, since oil prices are positively correlated with strong economic activity, it implied a higher demand for black gold, which, since China is the largest oil importer in the world, led to weakening gold prices.

In reaction, US, German and Japanese stocks fell, reinforcing negative market sentiment. The main US Wall St indices posted falls of more than 0.50%, while the German DAX and Japan’s Nikkei index fell from their all-time highs, with losses of 0.40% and 0.80% on the day, respectively.

technical levels

Based on the daily chart, WTI maintains a neutral to bearish outlook in the near term as the bears have lost some steam, but technical indicators remain negative, suggesting that the market may still have some downside potential. Furthermore, the price is trading below the 20,100 and 200-day SMAs, which indicates that, broadly speaking, the bears are in control.

To the upside, a move above the 20-day SMA at $70.80 would reignite bullish momentum for WTI, with next resistances at the $71.30 zone and $72.30 zone (daily high). On the downside, the next support levels to watch are the daily low at $69.80, followed by the $69.50 zone and the key psychological level of $69.00.