WTI Crude Extends Decline Below $86, Despite Positive EIA Crude Inventory Data
WTI crude oil extends its downward trend to below $86 due to a stronger US dollar. Strong employment data in the US puts pressure on oil prices as investors anticipate a hawkish stance from the Federal Reserve, leading to a stronger dollar.
The US benchmark West Texas Intermediate (WTI) crude oil continues its second-day decline, trading around $85.90 during Friday's Asian session. Despite positive inventory data released by the US Energy Information Administration (EIA), crude oil prices still face downward pressure.
The report shows a decrease of 6.37 million barrels in crude oil inventories for the first week of September, surpassing the expected decrease of 2.06 million barrels. However, crude oil prices have received upward support from ongoing supply cuts by OPEC+.
Additionally, Saudi Arabia, the world's largest oil exporter, has indicated its intention to extend voluntary production cuts of 1.66 million barrels per day throughout 2023. In this scenario, the impact of supply dynamics may help limit the potential downside risk for WTI oil prices.
Recent strength in the US dollar has led to the decline in oil prices, benefiting from consistently positive US economic data.
The initial jobless claims for the week ending September 1 recorded 216,000, lower than the previous value of 229,000. This data surpassed expectations of an increase to 234,000. Unit labor costs in the US improved to 2.2% for the second quarter, up from the previous value of 1.6%, with expectations remaining unchanged.
The US Dollar Index, which measures the value of the US dollar against six major currencies, is trading around 104.80. It is worth noting that the index slightly retraced from its peak on Thursday, reaching the highest level since April.
The Federal Reserve is expected to maintain a rising interest rate in the longer term. Furthermore, the market anticipates a 25 basis point rate hike at the November and December meetings. This hawkish stance may put pressure on oil prices.
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