17 Dec 2024

WTI prices are currently stable, hovering around $70.20 during the early Asian trading session on Tuesday. The recent weak spending data from China may exert downward pressure on WTI prices. However, geopolitical risks could limit the extent of any decline, despite the prevailing bearish market conditions.

West Texas Intermediate (WTI), the benchmark for US crude oil, is currently trading at approximately $70.20 on Tuesday. The price remains stable as market participants await the Federal Reserve's interest rate announcement scheduled for Wednesday. However, concerns regarding weak global demand growth in China may restrict any potential upward movement for oil prices in the near term.

Recent data on Chinese retail sales for November revealed a slower-than-anticipated growth rate, raising concerns about consumer spending in the country. This situation negatively impacts WTI prices, given that China is the largest oil importer globally.

According to the National Bureau of Statistics of China, retail sales increased by 3.0% year-on-year in November, a decline from the previous 4.8% and below the market expectation of 4.6%. Bob Yawger, director of energy futures at Mizuho in New York, remarked, "It's just a very bearish scenario where there's not a lot of hope of demand growth for crude oil."

Market analysts suggest that traders may adopt a cautious approach, potentially taking profits while they await the Federal Reserve's interest rate decision. The Fed is expected to reduce interest rates by 25 basis points at its December meeting. Market participants will be looking for insights from the subsequent press conference and dot-plot, as any hawkish comments from Fed officials could strengthen the US dollar and consequently lower the prices of dollar-denominated commodities.

Conversely, geopolitical tensions, particularly the imposition of additional sanctions on crude oil producers Russia and Iran, may help mitigate losses for WTI. US Treasury Secretary Janet Yellen highlighted the potential for targeting Chinese banks and "dark fleet" tankers to restrict oil revenue that supports Russia's military actions in Ukraine. Additionally, increased sanctions on Iranian crude exports could provide upward support for WTI prices.