WTI remains on the defensive above $72.30 amid concern about OPEC+ cut, China’s oil demand

Western Texas Intermediate (WTI), the US crude oil benchmark, is trading around $72.30 on Wednesday. The concern about the effectiveness of OPEC+ supply cuts and worries about a worsening demand outlook in China exert some selling pressure on the WTI prices.

Early Wednesday, Moody’s downgraded China’s sovereign credit rating from stable to negative. The credit rating agency cites the increasing risks to growth and a property sector crisis in China. This development warns lenders that the risk of a default has increased in recent years. That being said, the pessimistic economic outlook in China might cap the WTI’s upside as China is the world's largest oil consumer.

Last week, the Organisation of Petroleum Exporting Countries and its allies, including Russia (OPEC+), agreed on voluntary supply cuts of around 2.2 million barrels per day (bpd) for the first quarter of 2024. These restrictions include a 1.3 million bpd extension of Saudi and Russian voluntary cuts. However, this development fails to boost WTI prices as investors doubt how output cutbacks will be measured.

About the data, US crude oil inventories increased by 594,000 barrels for the week ending December 1 from the previous reading of 817,000 decline, according to the American Petroleum Institute (API). The market consensus expected a 2.267M barrel draw.

Looking ahead, oil traders will monitor the US ADP Employment Change for November and EIA Crude Oil Stocks Change, due later on Wednesday. The highlight of the week will be the US Nonfarm Payrolls (NFP) data on Friday. These events could significantly impact the USD-denominated WTI price. Oil traders will take cues from the data and find trading opportunities around the WTI prices.