WTI gains momentum above the $87.00 mark amid US crude draw, supply cut

• WTI prices hold above the $87.00 mark, supported by draws on US crude oil inventory.
• API showed that US crude oil inventories fell 5.521M barrels compared to -11.486M barrels prior.
• The fear of the economic slowdown in China and more rate hikes by the Federal Reserve (Fed) might limit WTI prices.

Western Texas Intermediate (WTI), the US crude oil benchmark, is trading around the $87.00 mark so far on Thursday. WTI prices gain momentum due to further draws on US crude oil inventory and the voluntary supply cut by Saudi Arabia and Russia.

The data released by the American Petroleum Institute (API) showed that US crude oil inventories fell 5.521M barrels compared to the previous week’s -11.486M barrels.

Furthermore, Saudi Arabia and Russia, the world’s major oil exporters stated that they will extend oil production cuts for the rest of 2023. The actions boosted WTI prices, which have been rising in recent weeks. That said, the cut will bring Saudi crude output closer to 9 million barrels per day in October, November, and December, and will be reviewed monthly. Russia’s Deputy Prime Minister Alexander Novak said that the nation would reduce its exports by 300,000 barrels per day through the end of 2023.

However, The fear of the economic slowdown in China might limit the WTI’s upside potential as China is the world’s largest oil importer. Oil traders await China’s Trade data for fresh impetus. Earlier this week, Caixin reported that the Chinese Services Purchasing Managers’ Index (PMI) fell to 51.8 in August from 54.1 in July.

Additionally, Markets expect the Federal Reserve (Fed) will keep interest rates over 5% for a longer period. According to the World Interest Rates Probabilities (WIRP) tool, market participants speculate a 25 basis point (bps) rate increase from the Fed for the entire year. It’s worth noting that higher interest rates raise borrowing costs, which can slow the economy and diminish oil demand.

Looking ahead, oil traders await the EIA Crude Oil Stocks Change data for the week ending September 1 due on Thursday at 15:00 GMT. These events could significantly impact the USD-denominated WTI price. Oil traders will take cues from the data and find trading opportunities around the WTI prices.