WTI drops below $90.00 as supply cuts-infused optimism fades, US CPI hogs limelight
- Oil prices have declined below $90.00 as the impact of OPEC’s production cuts has started easing.
- US officials are preparing to advance Russia’s oil price cap.
- An improvement in the US inflation rate would invite more policy-tightening announcements from the Fed.
West Texas Intermediate (WTI), futures on NYMEX, have slipped below the critical support of $90.00 as the impact of the production cuts announced by OPEC last week has started fading away. The oil cartel announced a supply cut of two million barrels per day (bpd), the highest cut since the emergence of the Covid-19 pandemic.
The OPEC members announced production cuts to support the oil prices as it has fallen around 40% from March’s high of around $120.00. It is worth noting that the majority of OPEC members have been failing in meeting their desired quotas of oil supply due to the unavailability of required production capacity. Therefore, the impact of the production cuts announcement remained short-lived.
Meanwhile, US Treasury Secretary Janet Yellen has cited that she will step up efforts to advance Russia's oil price cap, as reported by Reuters. The move has come after intensifying missile attacks by Russia in Ukraine. Also, the recent attack has been considered the biggest attack since the first day of the Russia-Ukraine war.
On the demand front, oil demand could dampen as Covid-19 cases in China have surged significantly after the Golden Week Holiday. The economy has reported 1,989 cases for Monday, the highest since August 19. The country has executed the zero-Covid policy as an under-control epidemic is crucial for blissful harmony in China.
Going forward, the US inflation data will be a key trigger for further guidance. Price pressures have not displayed a decent response in relation to the current pace of hiking interest rates by the Federal Reserve (Fed). An improvement in the inflation rate would invite more policy-tightening announcements from the Fed.