WTI retreats from a 12-month peak on profit taking, and higher rates worries

• WTI dips 1.30% to $92.45, retracting from a 12-month high of $94.99, as traders speculate on profit-booking and the potential economic impact of rate hikes.
• US economy exhibits resilience with a 2.1% growth in Q2 and an anticipated 4.9% GDP growth in Q3, amidst decelerating inflation.
• A possible US government shutdown looms, adding uncertainty to the markets, as Republicans and Democrats debate the 2024 Federal Government budget.

West Texas Intermediate (WTI), the US crude oil benchmark, retreats after rising to a new 12-month high on Thursday at $94.99 on speculations that traders book profits. That alongside worries that high-interest rates would weigh on global economies, dented Oil’s demand. WTI is trading at $92.45, losses 1.30%.

West Texas Intermediate faces a setback amid profit-booking speculations and concerns over high-interest rates impacting global economies, despite positive US economic data

Market sentiment improved, as seen by US equities trading in positive territory. The latest data from the United States (US) showed the economy grew steadily by 2.1% in the second quarter of 2023, while inflation decelerated. Also, growth estimates for the third quarter Gross Domestic Product (GDP) stand at 4.9%.

However, the story could be different if the US faces a shutdown, as Republicans and Democrats discuss the Federal Government budget for 2024, threatening to halt the government’s function if the bill hasn’t passed past Saturday night.

Most Federal Reserve officials remained hawkish during the week, with some taking a more neutral approach. Market participants are eyeing Fed’s Chair Jerome Powell's speech, later at 20:00 GMT.

Data-wise the latest US crude oil inventories fell by 2.2 million barrels last week, to their lowest level since July 2022, announced the US Energy Information Administration (EIA) office.

US crude draws followed cuts by Saudi Arabia and Russia, of 1.3 million combined, as the Organization of Petroleum Exporting Countries (OPEC) brings demand and supply into balance.

WTI Price Analysis: Technical outlook

After registering gains of more than 22% from August 24 lows toward the year-to-date (YTD) high of $94.99, WTI’s pullback was necessary. The Relative Strength Index (RSI) is exiting overbought conditions, aiming lower, while oil is expected to remain trading above $90.00 per barrel, though it’s currently testing the September 19 daily high of $92.63. A breach of the latter would expose the $90.00 mark, while an upward resumption and prices might challenge the psychological $95.00 level.