Oil fell more than 3 per cent to a three-week low as trend-following algorithms accelerated the day’s selloff.

U.S. crude inventories swelling to a nine-month high, combined with weaker Chinese industrial data, pushed West Texas Intermediate futures to settle at US$82.69 — below the key $84 support level, according to Fawad Razaqzada, a market analyst at City Index and Forex.com. “This gave rise to further technical selling,” he said. 

While markets are still waiting for Israel to respond to Iran’s weekend attack, with the US urging restraint, traders are returning their focus to market fundamentals. Key timespreads have weakened in recent days, pointing to softening sentiment.

Yet the downside could be limited, with the next key support level at $82, Razaqzada said.

Crude has surged this year on the back of upheavals in the Middle East and Russia, and OPEC+ output cuts. Potentially tightening the market further, the US plans to reimpose oil sanctions on Venezuela if Nicolas Maduro’s regime doesn’t take steps in the next two days to allow a fairer vote in elections this year, Bloomberg reported Wednesday.

Federal Reserve Chair Jerome Powell’s comments Tuesday, however, signaled policymakers will wait longer than previously anticipated to cut US interest rates, potentially providing a headwind for wider energy demand.

Prices:

• WTI for May delivery retreated 3.1 per cent to settle at $82.69 a barrel in New York.
• Brent for June settlement fell 3 per cent to $87.29 a barrel.