WTI remains depressed amid demand concerns, downside potential seems limited

WTI drifts lower for the third straight day amid worries about slowing Chinese economy.
A modest US Dollar strength contributes to the driving flows away from the commodity.
Worries about supply disruption from the Middle East might continue to act as a tailwind.

West Texas Intermediate (WTI) US crude Oil prices trade with a negative bias for the third successive day on Tuesday, albeit lack follow-through selling and hold above the overnight swing low. The commodity currently trades around the $80.70 region, down nearly 0.40% for the day and is pressured by a combination of factors. 

The official data released on Monday showed that China's economy expanded by 4.7% over the year during the second quarter of 2024, down from the 5.3% rise recorded in the first quarter. This adds to worries about a slowdown in the world's second-largest economy and waning fuel demand in the world's biggest oil importer, which, in turn, is seen as a key factor exerting some downward pressure on Crude Oil prices. 

Meanwhile, the US Dollar (USD) gains some positive traction and recovers further from over a three-month trough touched on Monday, which further contributes to driving flow away from the USD-denominated commodity. That said, growing acceptance that the Federal Reserve (Fed) will begin the rate-cutting cycle as soon as September might hold back the USD bulls from placing aggressive bets and positioning for further gains.

Apart from this, concerns about supply disruptions stemming from the ongoing conflicts in the Middle East should act as a tailwind for Crude Oil prices and help limit deeper losses. Hence, it will be prudent to wait for strong follow-through selling before positioning for an extension of the recent pullback from the vicinity of the $84.0 mark, or over the two-month peak touched on July 5. Traders now look to the US Retail Sales for a fresh impetus.