WTI sees a downside below $116.00 on renewed lockdown worries in China and higher US Inflation

• WTI is expected to remain subdued as higher US CPI has firmed the odds of a 75 bps rate hike by the Fed.
• The resurgence of Covid-19 cases in China has dampened the market sentiment.
• Prohibition of Russian oil imports will keep the oil supply constraints in check.

West Texas Intermediate (WTI), futures on NYMEX, has witnessed a minor bounce after hitting a low of $115.80 in the Asian session, however, the downside bias looks firmer amid renewed lockdown worries in China due to a resurgence in Covid-19 cases and soaring price pressures in the US economy.

The black gold witnessed a steep fall on Friday after the US Bureau of Labor Statistics announced the annual Consumer Price Index (CPI) at 8.6%, much higher than the expectations of 8.3%. A higher-than-expected annual inflation figure has underpinned the odds of a 75 basis point (bps) interest rate hike by the Federal Reserve (Fed) on Wednesday.

An extreme hawkish stance by the Fed will restrict liquidity in the market, which will force the corporate sector to add more filters on the investment opportunities and invest only in the most productive ones. Lower investments will scale down the oil consumption and henceforth the oil prices, which investors are discounting now.

Meanwhile, renewed lockdown worries in China have raised concerns over the oil demand. The Chinese cities: Shanghai and Beijing were recovering after an extreme two-month lockdown period and renewed Covid-19 worries have spooked the market sentiment.

On the supply front, the oil supply will continue to be a major constraint as a prohibition of oil imports from Russia will keep the supply worries intact for a longer horizon.