Crude Slump Continues: Breaks Below $50

Crude oil prices gained in the early Asian morning session shrugging off the poor flash manufacturing estimates coming out of China as investors bet on a rebound in the crude prices after a series of sharp falls over the last couple of trading session and looked ahead to the rig count data coming out of the US economy. It was reported today that the Markit/Caixin survey of China manufacturing showed a decline to 48.2 which is a 15 month low and well below the expected 49.7 The flash reading suggests that manufacturing conditions may be deteriorating in the world’s second largest economy and will raise questions over the resilience of the economic recovery. It is imperative to state that it was reported earlier this month that the Chinese economy grew by close to 7 percent during the second quarter of the year.

In the overnight session, crude collapsed by close to 2 percent and settled below the psychological level of $50 which was seen as a huge negative by traders and investors. The biggest concern for traders and investors at the current moment remains to be the oversupply in the energy markets. It was reported earlier this week that US crude inventories rose by 2.5 million barrels over the past week as compared to expectations for a 2.2 million barrel rise.

When looking at the charts for crude, it is apparent that bears are in total control at the current moment. Crude has been forming lower lows and lower highs which is indicative of the strong selling interest at higher levels. The momentum indicators for crude continue to trend lower which is indicative of the strong selling momentum present at current levels. The commodity currently trades below all important daily moving averages which is being seen as a bearish sign.