WTI is hovering around $68.50 near nine-month lows

• WTI prices remain low near 68.37, the lowest level since December 2023, which was recorded on Thursday.
• Crude oil prices lost ground on fears of demand in the United States and China.
• The change in EIA crude oil inventories fell by 6.873 million barrels, compared to the expected decline of 0.9 million barrels.

West Texas Intermediate (WTI) crude was trading around $68.60 during Asian hours on Friday, around the December 2023 low of 68.37 hit on Thursday. Crude oil prices are depreciating on demand concerns in both the United States (US) and China.

The US ISM Manufacturing PMI indicated that factory activity contracted for the fifth consecutive month, the pace of decline slightly exceeding expectations. In addition, the world’s biggest crude importer, China, showed that production activity fell to a six-month low in August as factory-gate prices fell significantly.

On Thursday, the US Energy Information Administration (EIA) reported a change in crude oil inventories, which reduced 6.873 million barrels of crude stockpiles for the week ended August 30. That was significantly higher than market expectations for a 0.9 million barrel decline. , following the prior reduction of 0.846 million barrels.

The drop in oil prices is said to be contained due to ongoing talks between the Organization of the Petroleum Exporting Countries and its Russia-led allies (OPEC+) over a delay in planned production increases due to start in October. According to Reuters, OPEC+ decided to postpone a planned increase in oil production for October and November and indicated that further delays or reversals of increases could be considered if necessary.

WTI prices could find support from accommodative comments made by Federal Reserve (Fed) officials, which increase the chances of an aggressive interest rate cut by the Fed in September. Lower borrowing costs could boost economic activity in the United States, potentially boosting demand for oil.

Chicago Fed President Austan Goolsbee said on Friday that the longer-term trend in the labor market and inflation data justified easing the Fed’s interest rate policy soon and then steadily over the next year. FXStreet’s FedTracker, which rates the tone of Fed officials’ speeches on a scale of 0 to 10 using a custom AI model, rated Goolsbee’s words neutral with a score of 3.8.

According to the CME FedWatch tool, markets fully anticipate a rate cut of at least 25 basis points (bps) by the Federal Reserve at its September meeting. The probability of a 50 bps rate cut rose to 41.0% from 30.0% a week ago.