The benchmark West Texas Intermediate (WTI) trades around $68.60 in early Asian markets on Friday, hovering around 68.37 recorded on Thursday, the lowest since December 2023. Crude oil prices depreciate due to concerns over demand in both the United States and China.
The US ISM Manufacturing PMI indicated that factory activity contracted for the fifth consecutive month, with the pace of decline slightly exceeding expectations. Additionally, the world’s biggest crude importer, China, showed that manufacturing activity fell to a six-month low in August, with factory gate prices dropping significantly.
On Thursday, the US Energy Information Administration (EIA) reported a Crude Oil Stocks Change, which reduced by 6.873 mln barrels of crude oil inventory for the week ending August 30. This was significantly larger than the market’s expectation of a 0.9 mln-barrel decrease, following the prior reduction of 0.846 mln barrels.
The downside of the oil prices would be restrained due to ongoing discussions between the Organisation of the Petroleum Exporting Countries and its allies led by Russia (OPEC+), regarding a delay in planned output increases set to begin in October.
According to Reuters, OPEC+ decided to postpone the scheduled oil output increase for October and November, and indicated that further delays or reversals of the hikes could be considered if necessary.
WTI prices may find support from the dovish comments made by Federal Reserve officials, which enhance the chances of an aggressive rate cut in September. Lower borrowing costs could stimulate economic activity in the U.S., potentially boosting oil demand.
Chicago Fed President Austan Goolsbee said on Friday that the longer-run trend of the labour market and inflation data justify the Fed easing interest-rate policy soon and then steadily over the next year.
FXStreet’s FedTracker, which gauges the tone of Fed officials’ speeches on a dovish-to-hawkish scale from 0 to 10 using a custom AI model, rated Goolsbee’s words as neutral with a score of 3.8.
According to the CME FedWatch Tool, markets are fully anticipating at least a 25 basis point (bps) rate cut by the Federal Reserve at its September meeting. The likelihood of a 50 bps rate cut has risen to 41.0%, up from 30.0% a week ago.
(Source: OANDA)
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