WTI treads waters near $90.00 with a negative bias, US PMI, Fed Powell's speech eyed

• Crude oil prices receive downward pressure due to the Fed’s hawkish stance on interest rates trajectory.
• US Crude oil production has surged to multi-year highs.
• Higher US Treasury yields contribute support to underpin the US Dollar.
• US passed bills to avert a government shutdown, securing funding until November 17.

Western Texas Intermediate (WTI) oil price hovers around $90.00 per barrel during the Asian session on Monday. The Crude oil price struggles to recover from recent losses due to market caution on the US Federal Reserve’s (Fed) interest rates trajectory.

Fed is expected to attempt another 25 basis points (bps) rate hike through the end of the year. Additionally, the market is factoring in the likelihood of higher interest rates for a prolonged period. The higher interest costs raise borrowing costs, which can affect the demand for Crude oil.

Recent weeks have witnessed a significant decline in US oil reserves, intensifying the bullish momentum in the oil market. However, according to the Energy Information Administration (EIA), US crude oil production has surged to multi-year highs.

This increase in fossil fuel production is driven by the effort to meet the demand gap left by the extended production cuts of 1.3 million barrels per day by Saudi Arabia and Russia through the end of the year. Despite the drawdown in reserves, the surge in production is indicative of the complex dynamics influencing global oil markets.

The total US crude reserves have sharply declined to approximately 420 million barrels, with the crucial Cushing, Oklahoma reserves plummeting to a mere 20 million barrels. Despite these supply constraints and diminishing reserves, there is an anticipation of US oil production reaching record highs.

Investors are swiftly adapting their forward-looking expectations for crude costs in response to these developments, reflecting the intricate balance between supply, reserves, and production levels.

Over the weekend, Chinese Manufacturing PMI data showed improvement into positive territory, which could provide support for the prices of black gold as China is the largest oil importer in the world.

China’s NBS Manufacturing PMI for August grew to 50.2 from the previous 49.7 figures, exceeding the 50.0 expected. Additionally, the Non-Manufacturing PMI rose to 51.7 from the 51.0 previous reading, surpassing the market consensus of 51.5.

The US Dollar Index (DXY) holds ground, continuing to gain on the second trading session following moderate datasets from the United States (US). The spot price trades higher around 106.20.

Further support for the strength of the USD comes from the positive performance of US Treasury Yields. The yield on the 10-year US Treasury bond stands at 4.61% at the moment, marking a 0.96% increase.

Crude oil faces challenges, primarily due to the upbeat US Dollar (USD) following the release of moderate economic data on Friday. The US Michigan Consumer Sentiment Index for September improved to 68.1 from the previous figure of 67.7, beating expectations for no change.

The US Core Personal Consumption Expenditures (PCE) - Price Index (YoY) for August rose as estimated, reaching 3.9%, but showed a slight easing from the previous reading of 4.3%. Core PCE (MoM) recorded a softer reading of 0.1% against the market consensus for it to remain consistent at the 0.2% prior.

Following Friday's session, bills were successfully passed in the US to prevent a government shutdown, securing funding until November 17. This development has prompted a resumption of the US Dollar Index (DXY) on an upward trajectory.

Traders in the Crude oil market will likely pay close attention to the upcoming US ISM Manufacturing PMI for September ahead of a speech by Fed Chair Jerome Powell on Monday. These events can potentially influence market dynamics and impact the performance of both the US Dollar and Crude oil.