WTI drops to near $70.50 on heightened oil supply, reconsideration on Fed rate cuts

• WTI price receives downward pressure US Dollar improves on risk-off sentiment.
• The expected higher oil supply in the first half of 2024 put pressure on Crude oil prices.
• OPEC+ plans to convene a JMMC meeting in early February to assess the adherence to its production agreements.

West Texas Intermediate (WTI) price trades near $70.50 per barrel during the Asian session on Wednesday. The WTI price faced challenges in the previous session as market expectations for the Federal Reserve's (Fed) rate cuts diminished. This shift in expectations is attributed to signs of sluggish growth in the United States (US) economy towards the end of 2024.

Crude oil prices face challenges despite the potential supply disruptions following the naval clash in the Red Sea. The recent attack by Houthi militants on a Maersk container ship was repelled by US helicopters, preventing a potential escalation. However, the threat level rises with reports of an Iranian warship entering the Red Sea.

The downward pressure on Crude oil prices is rooted in concerns over the deceleration of global economic growth and the escalating worry about heightened oil supply in the first half of 2024, particularly from producers outside the Organization of the Petroleum Exporting Countries and its allies (OPEC+).

OPEC+ is anticipated to convene a meeting of its Joint Ministerial Monitoring Committee (JMMC) in early February to assess the adherence to its production agreements. In the previous meeting, OPEC+ agreed to voluntary output cuts totaling approximately 2.2 million barrels per day (bpd) for the current quarter.

The upcoming release of the US EIA Crude Oil Stocks Change and API Weekly Crude Oil Stock data for the week ending on December 29 will be closely monitored on Wednesday. Analysts polled by Reuters anticipate a decline in crude stockpiles for the last week, while distillate and gasoline stocks are expected to have increased.