U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Tuesday amid concerns over lower domestic demand due to a slowing U.S. economy. Losses are likely being limited by concerns over rising tensions between the United States and Iran. The price action suggests that without a major economic turnaround, the markets are likely to make new lows for the month.
After starting out higher on Monday, crude oil prices turned lower following the release of the weaker-than-expected Empire State Manufacturing Index report. The New York Federal Reserve said that its gauge of business growth in New York State posted a record decline in June to its weakest level in more than 2-1/2 years, suggesting an abrupt contraction in regional activity.
The Empire State Manufacturing Index came in at -8.6. This was lower than the 12.1 forecast and 17.8 previous read.
This news came in on top of bearish Industrial Production news from China on Friday and warnings of lower global demand from the U.S. Energy Information Administration, the International Energy Agency and OPEC.
Rising U.S. supply also continues to be a bearish issue. On Monday, the U.S. Energy Department said that shale oil output is expected to reach a record high in July. The report showed that seven major US shale producers projected a rise in their crude oil output by 70,000 barrels per day to 8.5 million barrels in July.
Later today at 20:30 GMT, the American Petroleum Institute (API) will release its latest weekly inventories report. The recent trend has traders bracing for another inventories build.
In a story that is surprisingly generating very little support for prices, acting U.S. Defense Secretary Patrick Shanahan announced on Monday the deployment of about 1,000 more troops to the Middle East for what he said were defensive purposes, citing concerns about a threat from Iran.
August WTI crude oil futures are likely to remain under pressure as long at $52.89 holds as resistance. A trade through $50.79 could trigger an acceleration to the downside. August Brent crude oil is in a position to challenge a bottom at $59.45. This is a potential trigger point for an acceleration to the downside.
Prices could turn higher quickly if there is an escalation of the tensions between the United States and Iran.
This article was originally posted on FX Empire