WTI Extends Its Downside Around $73.70 Amid Uncertainty Over OPEC+ Output Cuts
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■ WTI trades in negative territory for the third consecutive day on Monday.
■ OPEC+ supply cuts agreed raising questions about how output cutbacks should be split among the group's member nations.
■ The risk of supply disruptions from the Middle East conflict might limit the downside of WTI prices.
Western Texas Intermediate (WTI), the US crude oil benchmark, is trading around $73.70 so far on Monday. WTI prices continue to decline as a result of the OPEC+ decision, as well as uncertainties about global fuel demand growth.
The Organization of the Petroleum Exporting Countries and its allies (OPEC+) agreed to voluntary output cuts for the first quarter of 2024. However, the OPEC+ supply cuts that they agreed to last week were voluntary, raising questions about how output cutbacks should be split among the group's 23 member nations.
Furthermore, the mixed economic data from China might exert some selling pressure on WTI prices. Last week, the Chinese Caixin Manufacturing PMI came in better than expected, but both the NBS Manufacturing and Services PMI were weaker than estimated. Concern about the recovery of China’s economy weighs on the black gold, as China is the world's largest gold producer and consumer.
On the other hand, an attack on an American warship and commercial vessels in the Red Sea on Sunday fueled the fear of escalating conflicts between Israel and Hamas. The risk of supply disruptions from the Middle East conflict might limit the downside of WTI prices.
Moving on, oil traders will keep an eye on the developments surrounding geopolitical tensions in the Middle East. Later this week, the US ISM Services PMI will be due on Tuesday and the Employment data will be released on Friday, including Nonfarm Payrolls, Unemployment Rate, and Average Hourly Earnings. These events could significantly impact the USD-denominated WTI price. Oil traders will take cues from the data and find trading opportunities around WTI prices.
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