• US EIA data reveals a significant drop in oil stockpiles, with a contraction of 5.96 million barrels last week.
• China’s disappointing economic indicators, including retail sales and investment figures, raise concerns about global oil demand.
• Saudi Arabia and Russia’s supply cuts provide a buffer, while the Fed’s monetary policy stance could influence the US Dollar and commodity prices.

Western Texas Intermediate (WTI), the US crude oil benchmark, extends its losses below the $80.00 psychological figure amidst a drop in US oil stockpiles while woes about China’s economic deceleration could dent oil’s demand, as reflected by WTI’s price. At the time of writing, WTI exchanges hands at around $79.70 per barrel after reaching a daily high of $81.39.

US crude production surges as inventories fall; China’s economic slowdown poses demand challenges for oil

On Wednesday, data from the US Energy Information Administration (EIA) showed that inventories fell as exports surged, even though crude production hit its highest levels since the Covid-19 pandemic weighed fuel consumption. Stockpiles dropped by 5.96 million barrels in the week of August 11 to 439.7 million barrels, above estimates for a 2.3 million-barrel contraction.

Oil prices are also being affected by recent data from China, the second largest economy in the world, as business activity is constrained, retail sales disappointed, investments figures missed estimates, and a deflationary scenario threatens to hit China’s government growth estimates of 5%.

Nevertheless, Saudi Arabia and Russia’s supply cuts cushioned oil prices fall, as WTI remains trading at around July high price levels.

Aside from this, WTI traders would take cues from the latest Federal Reserve (Fed) monetary policy minutes, as a strong US Dollar (USD), weighed on commodity prices. Investors are looking for clear signs that could reassure the Fed’s tightening cycle has ended. The latest Fed speeches have shown that officials are turning neutral, as previous hawks members like Atlanta Fed President Raphael Bostic and Philadelphia Fed President Patrick Harker said no more increases were needed.

WTI Technical Levels