WTI Trades with Modest Losses Below $77.00, Downside Potential Limited

West Texas Intermediate (WTI) crude oil prices are struggling to build on the previous day’s rebound from weekly lows, trading with a slight negative bias during the Asian session on Friday. The commodity is currently around the $76.70 mark, down 0.25% for the day, but remains poised for modest gains for the second consecutive week.
The risk of supply disruptions remains high due to escalating tensions in the Middle East. Additionally, strong US macroeconomic data released on Thursday has eased concerns about a downturn in the world’s largest economy. This, coupled with expectations that potential rate cuts by the Federal Reserve (Fed) could stimulate economic activity and increase fuel consumption, may continue to support crude oil prices.

Meanwhile, the US Dollar (USD) is struggling to maintain the positive momentum it gained after the previous day’s data, amid speculation that the Fed might begin its rate-cutting cycle in September. The prevailing risk-on sentiment is also weighing on the safe-haven Greenback, which typically boosts demand for USD-denominated commodities like crude oil.

However, investor concerns about an economic slowdown in China, the world’s largest oil importer, persist. This is compounded by recent downgrades in oil demand growth forecasts for 2024 from both OPEC and the IEA. Additionally, an unexpected build in US oil inventories, indicating a potential cooling in demand, is acting as a headwind for crude oil prices, exerting downward pressure as the week comes to a close.