WTI retreats towards six-month low under $88.00, focus on US inflation, Taiwan

• WTI fades Friday’s bounce off six-month low, renews intraday bottom of late.
• Market sentiment sours amid increased hawkish Fed bets, Sino-American tension over Taiwan.
• OPEC+ verdicts failed to impress buyers amid recession woes.
• US CPI for July will be crucial this week, risk catalysts can offer intermediate directions.

WTI crude oil prices remain depressed at around $87.50, retreating towards the six-month low, as markets brace for this week’s key US inflation data. Also exerting downside pressure on the black gold is the US dollar’s strength amid fresh hopes of the Federal Reserve’s (Fed) aggression. However, geopolitical tensions surrounding Taiwan and China’s latest trade data appeared to have challenged the oil bears of late.

The US Dollar Index (DXY) marked the first weekly gain in three after Friday’s strong US employment report for July renewed hawkish bias for the Fed. That said, the headline Nonfarm Payrolls (NFP) rose to 528K versus 250K expected and 398K upwardly revised prior. Further, the Unemployment Rate also inched lower to 3.5% compared to 3.6% expected and previous readings.

Considering the data, San Francisco Fed President Mary Daly said during the weekend that the Fed is far from done in combating inflation. The policymaker also added, “50 bps increase is definitely in play. We need to keep an open mind.”

Recently, China’s trade numbers for June marked upbeat results with the Exports rising the most in the year. That said, the headline Trade Balance rose to $101.26B versus $90B forecasts and $97.94B. Further details suggest that Exports increased by 18% compared to 15% expected and 17.9% prior whereas the Imports eased to 2.3% compared to 3.7% expected and 1.0% prior.

Alternatively, the recently escalated US-China tussles over Taiwan and the OPEC+ producers’ lower than the US-backed production increase should have helped the black gold prices. However, fears of recession join the hawkish hopes from the US central bank to exert downside pressure on the energy benchmark.

It’s should be noted that the S&P 500 Futures drop 0.33% intraday while tracking Friday’s downbeat performance of Wall Street. The US 10-year Treasury yields also remain pressured around 2.827% after rising 14 basis points (bps) the previous day.

Moving on, geopolitical headlines and recession could join Fed concerns to direct short-term WTI moves. However, major attention will be given to Friday’s US Consumer Price Index (CPI) for July.

Technical analysis

Unless providing a daily closing beyond the 200-DMA, around $94.25 by the press tie, WTI crude oil prices are declining towards the October 2021 peak surrounding $85.00.