WTI extends its losses to near $77.70 as demand concerns rise after US factory data

West Texas Intermediate (WTI) oil price extends its losses for the third successive session, trading lower near $77.70 per barrel on Wednesday. Concerns about demand weigh on Crude oil prices following recent data indicating slowing economic activity in the United States, the world's largest oil consumer. However, the weaker US Dollar (USD) may provide some support to oil prices by increasing demand from buyers using other currencies.

The ISM Services PMI declined to 52.6 in February, falling short of expectations for a decrease to 53.0 from 53.4. Additionally, Factory Orders (MoM) dropped by 3.6% in January, surpassing the anticipated decline of 2.9%. Former New York Fed economist Steven Friedman noted that Federal Reserve policymakers are likely to remain cautious about cutting interest rates this year due to strong growth and volatile inflation. He expected the possibility of fewer than the three cuts anticipated for 2024.

Moreover, the prospect of major central banks maintaining higher interest rates adds pressure on global economic activities, consequently dampening oil consumption. Concerns about demand growth are further exacerbated by apprehensions surrounding the world's largest Crude importer, China. Although China has set an economic growth target of around 5% for 2024, traders remain apprehensive as robust stimulus measures are lacking to support the country's faltering economy.

The increased apprehension regarding oil demand has tempered the impact of efforts by OPEC+ countries, Russia included, to enact voluntary oil output cuts. While the Organization of the Petroleum Exporting Countries and its allies (OPEC+) have committed to extending voluntary oil output reductions amounting to 2.2 million barrels per day (bpd) into the second quarter, the impact is muted by concerns surrounding demand dynamics.

The US API Weekly Crude Oil Stock data reported build-in stockpiles of 0.423 million barrels for the week ending on March 1, contrary to market expectations of a decrease to 2.6 million barrels from the previous 8.428 million barrels. Traders will now turn their attention to the US EIA Crude Oil Stocks Change report, scheduled for release on Wednesday, with market expectations leaning towards a reduction in the number of barrels in stock of crude oil and its derivatives.