Crude Oil snaps below $70 as OPEC, Libya flood supply side

• Crude Oil trades substantially lower after several headwinds emerged on Tuesday.
• The Libyan outage is set to be resolved, while recession fears in China and Europe weigh on the demand outlook.  
• The US Dollar Index trades above 101.00 ahead of the US Jobs Report on Friday.

Crude Oil struggles for support around $70.00 on Wednesday, extending losses after the 5% drop on Tuesday left Oil trading at its lowest level this year so far. Several headlines that came out on Tuesday were just too much to bear for Oil traders, sending the black fuel in a selloff spin. The headwinds are double-fold, taking place both on the demand side and on the sell side of the equation.

On the demand side, recent Purchasing Managers Index data out of China showed another severe slowdown in its manufacturing sector, which means more sluggish demand for Oil ahead. Meanwhile in Europe, one of Germany's core companies, Volkswagen, has announced plans to close several factories in its native homeland, a sign on the wall that Europe could be facing a severe recession. On the supply side, OPEC is steaming ahead with its intention to normalize output, while the political impasse in Libya is nearly resolved and might see Libyan Oil heading back to markets quicker than expected. 

The US Dollar Index (DXY), which tracks the performance of the US Dollar against a bucket of currencies, is holding ground above 101.00. All eyes are on the data points later this week, with several analysts having pencilled in that the US Jobs Report from Friday might be the deciding factor for the US Federal Reserve to cut interest rates either by 25 basis points or by 50 basis points. This makes Friday's Nonfarm Payrolls print even more important. 

At the time of writing, Crude Oil (WTI) trades at $69.52 and Brent Crude at $73.21

Oil news and market movers: API drawdown must be massive

• At 20:30 GMT, the American Petroleum Institute (API) will release its weekly crude oil stockpile change number. In the previous week, there was a drawdown of 3.4 million barrels. 
• Bloomberg reports that the issue concerning who should lead the Libyan central bank is set to be resolved soon, opening up the Oil output for the country.
• US Crude exports have found their way to India, with the US trying to push Russia out of its leading role as the main deliverer. According to ship-tracking data, nearly $1 billion worth of crude Oil has been delivered to India from the US, according to Business Standard news. 

Oil Technical Analysis: Washed out

Crude Oil's price action on Tuesday must have hurted a lot of parties. However, traders should not have been surprised by this move considering the recent string of headlines and data that pointed to an imbalance between oversupply - and more supply to come online - versus economic softer data with even some recession signals. More downturn could come ahead before a bounce can occur. 

On that upside, the lost level at $75.27 will be the first level to head back to if possible. Next up, the double level at $77.55 aligns with both a descending trendline and the 200-day Simple Moving Average (SMA). In case bulls are able to break above it, the 100-day SMA at $78.54 could trigger a rejection.  

On the downside, the low from August 5 at $71.17 has been broken. From here,  the $68.00 big figure is the first level to watch, followed by $67.11, which is the lowest point from the triple bottom seen back in June 2023. 

US WTI Crude Oil: Daily Chart