How do you construct a $100k portfolio, using just ETFs and futures? Find out in the new Top Dogs series.
tastytrade logo
uploaded image

Aug 10, 2021

Crude Oil and Iron Ore Prices in Tailspin as Covid Seen Damaging China’s Growth

By:Thomas Westwater


  • Crude Oil prices fall as China downgrades stifle demand bets

  • Iron ore prices join drop on Covid-induced demand worries

  • Australia Covid lockdowns likely to drag on as cases surge

Mounting worries over the quickly spreading Delta Covid variant’s impact on the global economy solidified further this week after Goldman Sachs and JP Morgan Chase downgraded economic outlooks on China. Goldman sees third-quarter growth slowing to 2.3% from 5.8%. A rebound in the fourth quarter may transpire, however, but the full-year projection remains worse off as restrictions are seen hampering consumption in the Chinese economy. Nearly 100 locally sourced cases were reported on Monday, according to China’s National Health Commission.

The downbeat outlook weighed on crude oil and iron ore prices, two major commodities that are particularly insightful to gauge demand in the world’s second-largest economy. Crude oil fell nearly 2% on Monday, while the global benchmark, Brent, sank just over half a percent. Meanwhile, iron ore prices added to recent losses, extending the monthly drop to almost 10%. Iron ore prices are highly reliant on Chinese demand, given it is the largest importer of the mineral ore.

The drop in prices may help ease some inflation pressure in the economy. Beijing moved to release state reserves of certain commodities in recent months, including crude oil and iron ore, to cool rapid price increases. The PBOC has also taken a variety of measures to support monetary policy, including a reduction in reserve ratio rates to spur bank lending. Balancing the recovery against growing inflation threats will remain key for Chinese authorities.

Still, China saw inflation - via CPI - rise 1.0% in July, while producer prices climbed 9.0% in the same time frame. Rising producer prices sometimes translate into higher prices for consumers down the road if producers feel the need to pass on higher input costs to consumers. Meanwhile, lockdowns in Australia are likely to drag on after New South Wales (NSW) reported 356 new virus cases on Tuesday. Overall, the Delta variant’s spread is now having a tangible and visible impact on global sentiment, particularly denting growth-sensitive commodities like oil and iron ore.


Crude oil’s technical posture has weakened substantially since reaching a multi-year high at 76.98 back in late July. Since then, prices have dropped over 10%. The 100-day Simple Moving Average (SMA) has also been breached this week. However, a trendline formed from the March low appears to be underpinning further losses. If prices pierce below the trendline, an extension lower may be likely. Alternatively, holding the trendline may see the preceding trend higher continue.


Uploaded image

Chart created with TradingView



Iron ore prices have seen a sharp drop over the last few weeks, with a slice through the 100- and 200-day Simple Moving Averages (SMAs). A trendline from October was also breached with ease. Prices are over 20% lower since June, and the 2021 yearly gain is in danger of being wiped out. The April low at 158.10 appears to be providing a layer of support. Below that, the 2021 low at 146.55 may be endangered. Bulls may need to recapture the 200-day SMA to regain a solid footing to push higher.



Chart created with TradingView

Written by Thomas Westwater, Analyst for
To contact Thomas, use the comments section below or @FxWestwater on Twitter

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Related Posts

tastytrade content is provided solely by tastytrade, Inc. (“tastytrade”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. tastytrade, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastytrade is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request. tastytrade is not a licensed financial advisor, registered investment advisor, or a registered broker-dealer. Options, futures and futures options are not suitable for all investors. Prior to trading securities products, please read the Characteristics and Risks of Standardized Options and the Risk Disclosure for Futures and Options found on 

tastytrade is a trademark/servicemark owned by tastytrade.

tastyworks, Inc. ("tastyworks") is a registered broker-dealer and member of FINRA, NFA and SIPC. tastyworks offers self-directed brokerage accounts to its customers. tastyworks does not give financial or trading advice nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastyworks’ systems, services or products. tastyworks is a wholly owned subsidiary of tastytrade, Inc (“tastytrade”).

tastyworks, Inc. (“tastyworks”) has entered into a Marketing Agreement with tastytrade (“Marketing Agent”) whereby tastyworks pays compensation to Marketing Agent to recommend tastyworks’ brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastyworks. tastytrade is the parent company of tastyworks. tastyworks and Marketing Agent are separate entities with their own products and services. tastytrade has different privacy policies than tastyworks.

Quiet Foundation, Inc. (“Quiet Foundation”) is a wholly-owned subsidiary of tastytrade The information on is intended for U.S. residents only. All investing involves the risk of loss. Past performance is not a guarantee of future results. Quiet Foundation does not make suitability determinations, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of Quiet Foundation’s systems, services or products.

© copyright 2013 – 2022 tastytrade. All Rights Reserved. Applicable portions of the Terms of use on apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastytrade’s podcasts as necessary to view for personal use.