By Barani Krishnan
Investing.com -- The selloff in oil showed no signs of slowing on Monday as bears in control of the market doubled down on their bid to get U.S. crude to the low $70s and possibly beneath.
New York-traded West Texas Intermediate, which serves as the U.S. crude benchmark, settled at $76.71 a barrel, down $2.03, or 2.6%, on the day, and 40% lower from its March high of around $130.
With September trading due to end this week, WTI is also down 14% so far on the month. Aside from that, it is headed for its first losing quarter since 2020, with a decline of 27% as of Monday for the July-through-September period.
Brent, the London-traded global benchmark for oil, settled at $84.06, down $2.09, or 2.4%, on the day and some 40% off from its March peak of almost $140. Brent is also 13% lower on the month, and off 28% for the third quarter.
Investors have fled from risk across markets as global central banks, led by the U.S. Federal Reserve, embark on the most aggressive rate hikes in four decades to fight inflation.
The Fed has raised rates by 300 points this year and plans to add another 125 by December, after starting from a base of just 25 in February.
Its action has sent the U.S. currency flying, with the Dollar Index, pitted against the euro and five other rivals, hitting one continuous 20-year high after another. A stronger dollar is typically bad for commodities priced in dollars, such as crude, as it makes them costlier for anyone using the euro and other currencies.
Monday’s peak of 114.42 for the so-called DX trading symbol in the dollar was the highest since its May 2002 high of 115.47.
While the rate hikes and the recession they might bring to the global economy have led the risk aversion across markets, the bears in control of oil were also looking at technical indicators that could heighten the selloff, said analysts.
“The catalyst might be economic fundamentals but there’s certainly a target to it, and that target is absolutely technical,” said Sunil Kumar Dixit, chief technical strategist at SKCharting.com. “For now, it’s $72 WTI and, if that breaks, it will be $63.”
Dixit breaks down his reading to this: With little respite for the Dollar Index’s climb, downward momentum builds on WTI to breach its 200-month Simple Moving Average of $72, before the more important test of the 50-month Exponential Moving Average of $63.