WTI consolidates weekly losses above $83.00 amid risk-on mood, softer US dollar

• WTI picks up bids to extend the previous day’s rebound from eight-month low.
• US Treasury official provides hints of oil price cap, Kuwait cuts Ocober crude price for Asia.
• US-China headlines, recent data favor sentiment amid a likely dull day ahead.
• Fears of recession, central bank aggression could keep the black gold pressured despite the latest rebound.

WTI crude oil prices remain firmer for the second consecutive day while paring the weekly losses around the eight-month low during Friday’s Asian session. That said, the black gold renews its intraday high near $83.50 by the press time.

Headlines from the US Treasury Department, concerning the oil price cap, seem to have joined the firmer sentiment and the softer US dollar to propel the energy prices of late. “The oil price cap should be set above the marginal production cost, taking into account past Russian oil prices,” said the US Treasury official.

Elsewhere, the US Dollar Index (DXY) drops 0.55% intraday, to 109.05 at the latest, amid firmer sentiment and sluggish US Treasury yields. It’s worth noting that the US 10-year Treasury yields remain sidelined near 3.32%, after a positive day, whereas the S&P 500 Futures traces Wall Street’s gains around 4,020.

Comments from US Treasury Secretary Janet Yellen, signaling likely positive change in the US-China trade ties, seemed to have helped the market sentiment of late. Additionally, Recently firmer US data and hopes that the global central bankers will be able to overcome inflation-led blow with a holistic approach and higher rates also seemed to have favored the market’s mood. On the contrary, the Wall Street Journal’s (WSJ) piece challenges the optimism a bit by suggesting further hardships for China’s technology companies.

Elsewhere, Kuwait has cut the October official selling prices for its crude grades from the previous month, a price document reviewed by Reuters showed on Friday. Earlier in the day, US Energy Secretary Jennifer Granholm mentioned that US President Joe Biden's administration is weighing the need for further releases of crude oil from the nation's emergency stockpiles after the current program ends in October. Before that, a Department Of Energy official later said the White House was not considering new releases from the US Strategic Petroleum Reserve (SPR) at this time beyond the 180 million barrels that the president announced months ago, per Reuters.

It should be noted that the latest weakness in China’s inflation numbers challenges the oil buyers, together with the hawkish central bank actions. China’s Consumer Price Index (CPI) and Producer Price Index (PPI) both print unwelcome numbers for August. That said, the headline CPI eased to 2.5% YoY versus 2.8% market forecasts and 2.7% prior while the PPI dropped to 2.3% compared to 3.1% expected and 4.2% prior.

Moving on, the last round of Fedspeak before the blackout period could entertain market players but there appear fewer oil-specific catalysts to watch.

Technical analysis

WTI recovery remains elusive unless crossing a two-week-old descending resistance line, around $84.70 by the press time.