USOIL Slides After New Underwhelming Data from China

USOIL Analysis

The Chinese economy grew by a frail 0.8% q/q in the second quarter of the year, while the more robust 6.3% y/y was smaller than expected and is also compared to period when the country was still struggling with the pandemic. June retail sales were disappointing at 3.1% y/y, although industrial production was more upbeat, having expanded 4.4% y/y.

Today's figures are only the latest in a continued stream of disappointing data from the world's largest importer of oil, which indicates that the post-covid economic rebound is sputtering. A few days earlier, the International Energy Agency (IEA) revised its 2023 demand forecast lower for the first time this year, noting that China's economic recovery is "losing steam after the bounce earlier in the year". More to it, the agency upgraded its supply projection for this year. ^[1]

USOil starts the week on the back foot, weighed by the disappointing data from China. There is now risk for a breach of EMA200 (72.10), which would make it vulnerable to the June lows (67.78) although sustained weakness beyond that level continues to look difficult.

On the other hand, last week's sharp deceleration in US CPI inflation has markets thinking that the Fed will peak later this month and start cutting rates early next year, which harms the greenback and can support USOil. Above the EMA200, buyers are in control with the ability to set new month highs, but don't inspire much confidence for tackling 83.55.