NYMEX crude oil prices fall under $70 after China stock plunge

Crude oil prices fell under $70 a barrel level on Monday [31 Aug 2009] after a stock market plunge in China sent jitters across world markets about prospects for global economic recovery. NYMEX light sweet crude for Oct 2009 delivery closed at $69.96. Oil prices see-sawed last week, hitting $75 per barrel for the first time in 10 months before falling sharply. On Thursday prices briefly dipped below $70 dollars then bounced back.

Markets were concerned over the sharpness of the fall in the Shanghai stock market. Shares in the Shanghai exchange dived 6.74% - its biggest loss in 14 months. The slowdown in lending, some feared, may derail recovery in China, which has been driving rapid economic growth, and impact demand for oil. The market has been anticipating higher oil demand in Asia, which many feel could drive global economic recovery from the worst recession in decades.

- The old economic shivers are back, so much for the green shoots talk. And with oil prices apparently trying to do a 1:1 correlation with the stock markets (not really, but sometimes it might seem that way), it's getting harder for traders to talk about fundamentals during periods like this, instead leaving the technicals to do the talking (and trading).

And talking about technicals, NYMEX crude oil prices are currently testing the lower limits of the roughly $70 to $75 trading range that they have been in for the whole of August 2009. The cyclic indicators including RSI and stochs are in mid-range, while the 50-/200-dma crossover is still in effect until proven otherwise. The 200-dma, meanwhile, stands at $54.93.

Translation : we've probably got quite a bit further to muddle through during this period of consolidation, unless $55 support is broken which doesn't look likely at this stage.

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