Oil sinks below $80 even as Saudi Arabia, Russia reaffirm supply cuts

• WTI Oil  falls to a three-month low.
• The US Dollar holds ground above 105.00 despite abrupt correction. 
• Oil faces risk of falling to $78, last line of defence before $70 comes into play.

Oil prices are falling like a rock despite the reaffirmation from Saudi Arabia and Russia that supply cuts will remain for at least until December. Traders are labelling the standing commitment as old news, sending Crude prices further down as China export numbers are showing a substantial slowdown and less demand from the biggest Asian Crude consumer in the region. Oil prices have made a new three-month low and might head further down in current conditions. 

Meanwhile, The US Dollar (USD) fell hard last week, and saw its summer rally coming to an end. Several US economic indicators are starting to flash red, meaning that the economy is starting to cope badly with the elevated rate environment. Meanwhile, US spending is going through the roof as US President Joe Biden is pledging millions not only to Ukraine, but to Israel as well, increasing the debt burden for the US Treasury. 

Crude Oil (WTI) trades at $79.13 per barrel, and Brent Oil trades at $83.43 per barrel at the time of writing. 

Oil news and market movers

• The Ozark pipeline in the US has reported an outage. The pipeline transports mainly US crude from Cushing, Oklahoma, to a Phillips 66 refinery in Illinois. This is good news for the Cushing supply build after being at several substantial low level.
• China economic numbers have shown that exports shrank by a substantial 6.4% , which means that the biggest demand player in the Oil market will show less appetite for buying crude Oil. 
• Saudi Arabia and Russia have reconfirmed their commitment to cut Oil output by more than 1 million barrels per day combined. This move suggests that both countries are trying to protect an elevated floor in prices amid bleak demand. 
• The weekly American Petroleum Institute Crude Stockpile numbers are due to come out at 21:30 GMT. Previous number was a build of 1.374 million.  

Oil Technical Analysis: Sinking lower

Oil prices are retreating further from their peaks. Although some Oil producing countries are trying to put a price cap, the current fade in demand is too big to bear. More selling pressure could be on the horizon as US crude stockpile numbers could reveal a build. Either more supply cuts or a substantial spillover of violence in the Middle East could see Oil prices spiking again. 

On the upside, $84.25 is the new resistance. Should Crude be able to print a similar performance as the US Dollar Index did on Tuesday, expect even a quicker sprint to $88. Should Oil prices be able to consolidate above there, the topside for this fall near $93 could come back into play.

On the downside, traders are bracing for the entry of that region near $78. The area should see ample support for buying. Any further drops below this level might see a firm nosedive move, which would likely cause Oil prices to sink below $70.

US Crude (Daily Chart)