WTI Oil Holds Steady Above $76.60 as FOMC Meeting Approaches

Western Texas Intermediate (WTI), the benchmark for US crude oil, is maintaining its position above the $76.60 level on Friday, displaying consolidation after achieving its fourth consecutive weekly gain. This upward momentum comes amidst indications of a tightening oil market.

Adding to market dynamics, tensions between Russia and Ukraine have escalated, with Russia attacking Ukrainian food export facilities for the fourth consecutive day and seizing ships in the Black Sea. These geopolitical developments have provided support to WTI prices.

Examining recent data, the Energy Information Administration (EIA) reported a decrease of 708,000 barrels in crude oil stocks for the week ending July 14. This figure contrasted with expectations of a 2.44-million-barrel decline and a 5.946 million barrel gain observed the previous week, further contributing to the positive sentiment surrounding WTI.

Additionally, Baker Hughes disclosed a decline of seven oil rigs in the United States this week, marking the largest drop since early June. With the number of active oil rigs reaching its lowest level since March 2022, at 530, concerns over the supply-side dynamics have emerged, propelling crude oil prices higher.

Furthermore, China’s Commerce Ministry announced measures to stimulate household consumer goods and services consumption, fostering optimism for increased WTI prices.

On the other hand, the potential upside for WTI appears limited as market participants await the Federal Reserve’s (Fed) upcoming monetary policy decision, scheduled for Wednesday. While a 25 basis point rate hike is already priced in, investors are reevaluating the possibility of another rate increase following the July meeting, leading to a rebound in the US dollar. The CME FedWatch Tool indicates that the probability of a rate hike after the July meeting has risen to 28% from 15.9% the previous month, signifying a shift in traders’ views on Fed monetary policy. It’s important to note that higher interest rates can increase borrowing costs, potentially slowing economic growth and dampening oil demand.

As the FOMC meeting approaches, oil traders eagerly await the statements and insights from Fed Chairman Jerome Powell’s press conference, recognizing its potential impact on the USD-denominated WTI price.

In addition to the FOMC announcement, traders will closely monitor key economic indicators such as US CB Consumer Confidence, Advance GDP QoQ, and the core Personal Consumption Expenditure (PCE) Price Index MoM, seeking further guidance for their trading strategies in the ever-changing global oil market.