Wti Declines On Economic Woes

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Wti Declines On Economic Woes

Wti Declines Below $75.00 On Economic Woes

West Texas Intermediate (WTI) is trading near $75.10 on Wednesday with a bearish bias. The reason for the drop in the WI prices is the concern about slow growth in China and the USA.

Recently, the US Consumer Confidence Index was released, which showed a change from 101.9 to 103.3 during August. Although the reading has shown improvement, a lot of consumers are worried about high unemployment rates and tough labor market.

After all, the 4.3% unemployment rate in the USA is the highest level of the last 3 years and shows the ill-effects of high interest rate.

China'S Weakness Weighs On Crude Oil

Meanwhile, investors are also worried about the economic health of China along with the future oil demand. Similar concerns are also present about the USA which is also going through a phase of slow economic growth.

According to Goldman Sachs, the China's oil demand has gone down as the country is now moving towards EV and ditching the oil powered cars.

Recent data has also shown that the US crude inventories declined in the previous week. According to API, a 3.4 million drawdown was registered in the US crude oil stockpiles. However, the market was only forecasting a 3.0 million barrel decline, which shows an increased consumption of crude oil.

Over all, the oil prices are expected to recover as all the major central banks are now cutting rates or thinking about it. The ECB and the BoE have already started to cut rates, while the US Federal Reserve is about to start in September.

Similarly, the BoC and other major central banks are also lowering their policy rate in order to prop up the economic activity. An increase in economic activity will also lead to higher oil demand and, thus, higher oil prices.

That's why it is safe to say that a bullish phase will start in the WTI as the interest rates start to go down in the next few months.

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