(Bloomberg) — Oil prices slid as algorithmic traders exploited market uncertainty and traders weighed Chinese demand against dwindling U.S. inventories.
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West Texas Intermediate (WTI) fell below $78 a barrel, on track to fall for a third straight week for the first time since early June. Oil prices have been sluggish recently due to selling pressure from trend-following commodity trading advisors and a sharp selloff in the stock market. These factors have exacerbated concerns about China’s economic growth, as the Chinese government cut interest rates this week to stimulate the economy of the world’s largest oil importer.
Still, data released this week showed U.S. inventories falling for the fourth time since February, the lowest since 2013. Timespreads continue to point to tight conditions in the near term. These mixed signals have kept futures stuck within a trading band around $4 this week.
“We need a positive catalyst, but right now with inventories expected to draw down it’s not a good enough reason to buy at these lows,” said Rebecca Babin, senior energy trader at CIBC Private Wealth.
Oil prices have edged higher so far this year, buoyed by supply cuts from the OPEC+ alliance and hopes of lower U.S. interest rates, but market participants are divided over whether the cartel will ease production limits next quarter, with an online meeting of its oversight committee scheduled for Aug. 1.
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