WTI loses traction near $78.60 amid US inflation fears, China’s economic woes

• WTI prices trade in negative territory for the fourth consecutive day on Thursday.
• Crude oil inventories fell by nearly 6 million barrels last week.
• Concerns about the Chinese economic slowdown and property crisis remain in focus.
• Oil traders will watch the US weekly Initial Jobless Claims, the Philadelphia Fed Manufacturing, China's sluggish economy headlines.

Western Texas Intermediate (WTI), the US crude oil benchmark, is trading around the $78.60 mark so far on Thursday. WTI prices trade in negative territory for the fourth consecutive day on Thursday amid the possible further tightening of monetary policy by the Federal Reserve (Fed) and China’s economic woes.

The US Energy Information Administration (EIA) reported on Wednesday that crude oil inventories fell by nearly 6 million barrels in the week ending August 11, above the 2.3 million-barrel contraction expected. Meanwhile, crude oil production has reached its peak since the coronavirus outbreak destroyed the demand for oil.

That said, the minutes of July’s meeting of the Federal Open Market Committee (FOMC) emphasised that inflation remained unacceptably high. The Fed official saw significant inflationary risks, and it may need additional tightening of monetary policy to bring inflation to the longer-run target. The hawkish stance of Fed officials capped the upside for WTI prices. It’s worth noting that higher interest rates raise borrowing costs, which can slow the economy and diminish oil demand.

Furthermore, concern about the economic slowdown and property crisis in China remains in focus. On Wednesday, the Chinese House Price Index for July fell to -0.1% versus 0% prior. The data raises concerns about a possible property crisis in China, particularly as big developer Country Garden Holdings struggles to meet its debt obligations. Meanwhile, Chinese Retail Sales for July came in at 2.5% YoY compared to 4.8% expected and 3.1% previously, while the country's Industrial Production fell to 3.7% YoY compared to 4.5% expected and 4.1% previously. More evidence of China's economic deterioration might drag the black gold lower.

On the other hand, the tightening supply could further contribute to upward pressure on WTI prices. Saudi Arabia announced it would extend its voluntary oil output cut of one million barrels per day (bpd) through September. In the meantime, Russia's oil exports will also decrease by 300,000 bps in September. The report on Wednesday revealed that Saudi Arabia's oil exports fell below 7 million barrels per day for the first time this year, reaching their lowest level since September 2021.

Moving on, oil traders will shift their focus to the US weekly Initial Jobless Claims for the week ending August 11 and the Philadelphia Fed Manufacturing Survey for August, due later in the American session. Also, the headline surrounding China's sluggish economy remains in the spotlight. These events could significantly impact the USD-denominated WTI price. Oil traders will take cues from the data and find trading opportunities around the WTI price.