WTI retreats from a YTD high, holds above $82.40 ahead of US PPI

• WTI retreats from a YTD high of $84.28, currently trades near $82.65, up 0.10% in the early Asisn session.
• The Chinese economic data fuels concern about the oil demand outlook.
• The Petroleum Exporting Countries (OPEC) said the outlook for global oil market H2 is positive.
• Tighter supply due to the prolonged voluntary limits on Saudi Arabian output has underpinned a rally in WTI prices.
• Oil traders will closely watch July’s US Producer Price Index (PPI).

Western Texas Intermediate (WTI), the US crude oil benchmark, is trading around the $82.65 mark so far on Friday after retreating from a YTD high of $84.28.

The Chinese economic data fuels concern about the possible deflation in the world's second-largest economy and the outlook for oil demand, which exerts pressure on WTI prices. That said, the Chinese Consumer Price Index (CPI) YoY fell 0.3% in July from 0% prior, and the market consensus anticipated a -0.4% decline. Meanwhile, the Producer Price Index (PPI) declined 4.4% YoY, compared to the 4.1% decrease YoY expected and a 5.4% drop prior. Additionally, China's crude oil imports in July decreased 18.8% from the previous month to the lowest daily rate since January.

Furthermore, the renewed trade war tension also weighs on the WTI price. US President Joe Biden issued an executive order on Wednesday prohibiting new US investments in China in sensitive technologies. The administration also plans to "narrow subsets" of the three domains, but the administration did not provide further details  and the proposal is available for public comment. The exacerbated trade war headline between the world’s two largest economies might limit the upside in black gold for the time being.

On the other hand, the Organization of the Petroleum Exporting Countries (OPEC) said on Thursday that the outlook for the global oil market in the second half of the year is positive, as OPEC reaffirmed its prediction for resilient oil demand in 2024 and raised its forecast for global economic growth. This, in turn, could cap the downside of the WTI.

OPEC forecasts that global oil demand will increase by 2.25 million barrels per day (bpd) in 2024, against 2.44 million bpd in 2023. Additionally, global economic growth this year is expected to rise to 2.7% from 2.6%, and revised the figure for next year to 2.6%, stating that growth in the United States, Brazil, and Russia in the first half of 2023 exceeded initial expectations.

Meanwhile, tighter supply due to the prolonged voluntary limits on Saudi Arabian output has underpinned a rally in oil prices. Saudi Arabia's crude oil output fell from 968,000 bpd in June to 9.021 million bpd in July. Last week, Saudi Arabia announced it would extend its voluntary oil output cut of one million barrels per day (bpd) through September. In the meantime, Russia's oil exports will also decrease by 300,000 bps in September.

Oil traders will closely watch July’s US Producer Price Index (PPI). The figure is expected to rise from 0.1% to 0.7% YoY. 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.