Oil Sinks to Five-Week Lows Propelled by Algos in Summer Trade

West Texas Intermediate dropped as much as 1.6% to trade near $77 a barrel, the lowest in five weeks. The decline was propelled by algorithmic traders dumping their bullish positions after futures surpassed both the 50-day and 100-day moving averages, which have acted as support levels. Oil is approaching oversold territory on the 9-day relative strength index, suggesting a reversal may be imminent.

The industry-funded American Petroleum Institute will issue its estimate for weekly shifts in US inventories later Tuesday, followed by a government breakdown on Wednesday. Nationwide crude stockpiles have dropped for the past three weeks, reaching the lowest level since February.

​Crude prices remain higher year-to-date, helped by OPEC+ supply cutbacks and expectations for lower US interest rates, perhaps as soon as September. Political risks remain front and center as investors weigh the implications of US President Joe Biden dropping his reelection bid.