WTI moves below $90.00 ahead of US economic data

Western Texas Intermediate (WTI), the US crude oil benchmark, is hovering around $89.90 during the European session on Friday. WTI prices experienced a correction from the Year-To-Date (YTD) high at $90.56, which was marked earlier in the day.

The International Energy Agency (IEA) reported on Wednesday that the reduction in OPEC+ output would result in a significant supply deficit in the fourth quarter, starting in September. Consequently, WTI prices have been on the rise in recent weeks due to a tighter supply resulting from voluntary oil production cuts by Saudi Arabia and Russia.

These two major oil-exporting nations, Saudi Arabia and Russia, declared their commitment to extending oil output restrictions until the conclusion of 2023. As a result, Saudi Arabia's oil production will be reduced to approximately 1.3 million barrels per day (bpd) throughout the remainder of 2023.

Furthermore, OPEC expressed optimism in its monthly report released on Tuesday regarding Chinese demand for oil throughout 2023. OPEC has upheld its forecast for strong growth in global oil demand for 2023 and 2024, despite challenges like rising interest rates and higher inflation.

According to the report, the organization anticipates that global oil demand will increase by 2.25 million bpd in 2024, a slight decrease from the 2.44 million bpd growth expected in 2023. These forecasts remained unchanged from the previous month's projections.

Additionally, the positive data released by the National Bureau of Statistics (NBS) in China reveals encouraging economic trends. The upbeat figures could provide support in underpinning the Crude oil prices, coupled with the market optimism due to the recent move by the People's Bank of China (PBoC).

In August, China's year-over-year Retail Sales showed robust growth, expanding by 4.6%. This exceeded expectations, which had forecasted a 3.0% increase, and marked an improvement from the previous month's figure of 2.5%. Furthermore, Industrial Production exceeded estimates by recording a growth rate of 4.5% in August, compared to a 3.7% rise in July.

Furthermore, Chinese authorities have reduced the Reserve Requirement Ratio (RRR) by 25 basis points (bps) for a significant portion of the banking system. This action is aimed at releasing additional liquidity and potentially supporting economic growth in the world's second-largest economy.

US Dollar Index (DXY) has retreated from its recent six-month high, trading lower around 105.20. However, the likelihood of a substantial corrective decline in the Greenback seems restricted, largely due to market participants being cautious in response to the US Federal Reserve's (Fed) hawkish stance on monetary policy.

Furthermore, the US Treasury yields snapped the previous day’s gains, with the yield on the 10-year US bond corrects at 4.28% by the press time. The pullback in yields might exert minor pressure on the USD.

Traders are expected to closely watch the release of the US preliminary Michigan Consumer Sentiment Index during the North American session. The consensus expectation is for a minor decline from the previous reading of 69.5 to 69.1.

This economic indicator could provide insights into the economic situation, which can contribute support in deciding the trading bets on the US Dollar (USD).