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  • WTI is consolidating its recent gains around the $78.80 mark.
  • Supply cuts from Saudi Arabia and Russia, hopes of Chinese stimulus measures lift WTI prices.
  • Further rate hikes could curb WTI growth due to an economic slowdown in the Eurozone.
  • Oil traders will be watching the Federal Open Market Committee (FOMC) meeting on Wednesday.

Western Texas Intermediate (WTI), the US crude oil benchmark, is trading around $78.80 so far this Tuesday. WTI is consolidating recent gains after hitting its highest level since April 24, boosted by signs of a tighter oil market, data and hopes for China’s stimulus plan.

Several factors have contributed to WTI’s recent gains. WTI rose modestly for four straight weeks, with supply expected to tighten due to cuts by the Organization of the Petroleum Exporting Countries (OPEC) and allies such as Russia, known as OPEC+.

On the data front, Baker Hughes said the U.S. oil rig count fell by seven last week, the most since early June. The current number of active oil rigs in the United States fell to 530, the lowest since March 2022. Baker Hughes rig count data exacerbates supply-side concerns and contributes to Petroleum price increase.

China, the world’s second-largest oil consumer, also signaled additional support for the real estate sector and a series of measures to stimulate domestic consumption amid a sluggish post-Covid recovery. This, in turn, supports further growth in the price of WTI.

On the other hand, upside for WTI may be limited as market participants await the Federal Reserve’s (Fed) monetary policy decision on Wednesday. The Fed is widely expected to raise interest rates by a quarter of a percentage point to 5.25-5.50%. It’s worth noting that higher interest rates increase borrowing costs, which can slow the economy and reduce demand for oil.

On the euro front, eurozone manufacturing sector woes worsened in July. The Eurozone Purchasing Managers’ Index (PMI) fell to 42.7, below market expectations of 43.5 and June’s reading of 43.4. The index hit its lowest level in 38 months. The data dampens demand for WTI.

Oil traders will be watching the Federal Open Market Committee (FOMC) meeting and Fed Chairman Jerome Powell’s press conference. This event could significantly affect the price of WTI denominated in USD. In addition, traders will look at US central banks’ consumer confidence, quarter-on-quarter GDP growth and the Fed’s preferred inflation gauge, MoM’s core personal consumption expenditure (PCE) price index later. this week.

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