Algorithms Push Oil Prices to Five-Week Low

Oil prices dropped on Tuesday to their lowest point in five weeks, driven by a wave of algorithmic selling. The U.S. benchmark WTI has now dipped as much as 1.6% to a level that is dangerously close to $77 per barrel. The decline follows the surpassing of key technical levels, namely the 50-day and 100-day moving averages, which typically serve as support thresholds. The market's current low liquidity during the summer months has further amplified this downturn.

The Brent crude benchmark fell 1.27% by 2pm ET, to $81.13 per barrel.

The drop in prices indicates that WTI is approaching oversold territory, suggesting that a potential reversal could be on the horizon. However, industry watchers remain cautious as they await the American Petroleum Institute's (API) weekly estimate on U.S. crude inventories, which will be released later Tuesday afternoon, and the Energy Information Administration's Weekly Petroleum Status Report, which will be released on Wednesday. Recent API data indicates that U.S. crude stockpiles have decreased for three consecutive weeks, totaling a more than 15 million barrel dropoff, reaching their lowest levels since February.

Despite the current downward trend, crude prices have maintained a higher year-to-date average, supported by OPEC+ supply reductions and anticipations of lower U.S. interest rates, potentially as soon as September. Political uncertainties have also factored into oil prices, including the attempted assassination of former President Donald Trump and the decision by President Joe Biden to drop out of the race.

The API's weekly estimate of crude oil inventories in the United States will be released at 4:30pm ET. Analysts have predicted a 700,000 barrel build in U.S. crude oil stocks. A stock build would end three consecutive weeks of inventory losses in the United States.

By Julianne Geiger for Oilprice.com

More Top Reads From Oilprice.com:

• Europe and China Remain the Biggest Buyers of Russian Pipeline Gas
• European Natural Gas Prices Fall as Freeport LNG Resumes Operations
• Major Automakers Returning to Gasoline Cars as EV Demand Slows