WTI consolidates around mid-$85.00s. just below YTD peak touched on Monday

• WTI Crude Oil prices consolidate the recent gains to a fresh YTD peak touched on Monday.
• A combination of factors favours bulls and supports prospects for further appreciating move.
• A mildly softer tone around the USD adds credence to the positive outlook for the commodity.

Western Texas Intermediate (WTI) Crude Oil prices enter a bullish consolidation phase during the Asian session on Tuesday and oscillate in a range around mid-$85.00s, just below the 2023 peak touched the previous day.

The prospects of tighter global supplies, along with hopes for a demand recovery in China, turn out to be key factors acting as a tailwind for the black liquid. In fact, investors anticipate that the Organization of the Petroleum Exporting Countries (OPEC) and allies (OPEC+) will extend output cuts to the end of the year. Moreover, Saudi Arabia – the world's top oil exporter – is widely anticipated to extend its voluntary 1 million barrel per day (bpd) cut for a fourth consecutive month into October.

Adding to this, Russian Deputy Prime Minister Alexander Novak has said that Moscow had agreed with OPEC+ partners on the parameters for continued export cuts in October. Investors now await more details on the deal, which will be revealed this week. In the meantime, the optimism that additional stimulus from China, to shore up a slowing economic recovery will boost fuel demand and lend additional support to WTI Crude Oil prices. This, in turn, supports prospects for additional gains.

Furthermore, a mildly softer tone surrounding the US Dollar (USD), weighed down by growing acceptance that the Federal Reserve (Fed) will soften its hawkish stance, could underpin the USD-denominated commodities, including Oil prices. The mixed US jobs report released on Friday pointed to a slight deterioration in the labour market. This gives the Fed less headroom to keep raising interest rates. In fact, the Fed is widely anticipated to leave interest rates unchanged at its September policy meeting.

The aforementioned fundamental backdrop suggests that the path of least resistance for WTI Crude Oil prices is to the upside. That said, oscillators on the daily chart have moved on the verge of breaking into the overbought territory. This, in turn, is holding back bullish traders from placing fresh bets and capping the upside, at least for the time being.

Technical levels to watch