Market news
31.07.2023, 00:09

WTI retreats from a multi-week high and holds above $80.20, Chinese PMI eyed

  • WTI retreats from a multi-week high of $80.50 ahead of Chinese data.
  • The US Core PCE Price Index came in at 4.1% annually versus 4.6% prior and below expectations of 4.2%.
  • Oil traders will focus on the Chinese NBS Purchasing Managers Index (PMI) and the development of the stimulus plan in China.

Western Texas Intermediate (WTI), the US crude oil benchmark, is trading around the $80.20 mark so far in the early Asian session. WTI prices retreat from multi-week highs following the US Personal Consumption Expenditures (PCE) Price Index and the Michigan Consumer Sentiment Index on Friday. Oil traders will keep an eye on the Chinese inflation data and developments about the Chinese stimulus plan for fresh impetus later in the day.

On the US Dollar front, the Personal Consumption Expenditures (PCE) Price Index for June fell to 3% from 3.8% in May, below the market's expectation of 3.1%. The Federal Reserve's preferred measure of inflation, the Core PCE Price Index, came in at 4.1% annually, down from 4.6% in May and worse than expected at 4.2%. Also, the final readings of the Michigan Consumer Sentiment Index for July decreased to 71.6 from 72.6, and the University of Michigan's (UoM) 5-year Consumer Inflation Expectations fell to 3.0% from 3.1% prior and as market expectations.

That said, China, the world’s second-largest oil consumer, signaled additional support for the real estate sector and measures to stimulate domestic consumption amid a sluggish post-COVID recovery. The State Council Information Office of China revealed that Li Chunlin, vice chairman of the National Development and Reform Commission, and officials from the Ministry of Industry and Information Technology, the Ministry of Commerce, and the State Administration of Market Regulation will hold a press conference at 7 a.m. GMT to announce additional measures to boost consumption. The development of the headline might support further upside in the WTI price.

Market players will watch the Chinese NBS Manufacturing and Non-Manufacturing Purchasing Managers Index (PMI). The upbeat data might encourage WTI prices, while the softer data might fuel concern about the economic slowdown in the world’s second-largest economy. This, in turn, might exert pressure on WTI prices.

Apart from this, WTI has risen for four weeks due to OPEC+ supply cuts. OPEC+ announced a five-year supply cut of over five million barrels per day (bpd), or 5% of world oil production in April. It is expected that Saudi Arabia will prolong its 1 million barrel oil production reduction into September after extending it into August. Market players will monitor the OPEC+ group's Joint Ministerial Monitoring Committee (JMMC), scheduled for August 4, for fresh impetus.

Moving on, oil traders will focus on the Chinese PMI data and the development of more stimulus plans later in the day. The attention will shift to the US employment data. The JOLTS Job Openings report, ADP Private Employment, Weekly Jobless Claims, and Unit Labour Cost will be released later this week. The week's key event is the Nonfarm Payrolls report, due on Friday. 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 price.

 

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