EIA crude inventory data show a decline in oil demand.
Renewed tensions in US-China trade war could exert pressure on WTI oil price.
Market participants expect the Federal Reserve (Fed) to adopt a more dovish policy stance.
WTI crude futures may rise in the near term, with short-term resistance slightly above $77 per barrel.
As of Thursday this week, the US benchmark West Texas Intermediate (WTI) crude traded near $75.40. The WTI price declined due to the release of crude inventory data, and market participants will closely monitor US-China relations for new catalysts.
Crude inventory data indicate a decrease in oil demand, which pushed down WTI prices after the announcement of the inventory changes. The US Energy Information Administration (EIA) reported on Wednesday that crude inventories decreased by 708,000 barrels for the week ending July 14, compared to an expected decrease of 2.44 million barrels and a previous week increase of 5.946 million barrels.
However, renewed tensions in the US-China trade war could exert downward pressure on WTI oil prices. On Thursday, Chinese Ambassador to the US Xie Feng criticized the US plans to impose restrictions on foreign investment and AI chip technology. He added that if the US implements further restrictions on China's chip industry, China will take countermeasures.
On the other hand, market participants expect that the tightening cycle of the Federal Reserve is nearing its end and will remain unchanged after a 25 basis point rate hike in July. The Fed's more dovish stance could limit the downside potential for WTI oil prices. It's worth noting that higher interest rates can increase borrowing costs, leading to economic slowdown and reduced oil demand.
Meanwhile, Russia plans to reduce its oil exports by 2.1 million metric tons in the third quarter, matching the voluntary daily reduction of 500,000 barrels planned for August.
WTI Crude Futures Have Further upside Potential in the Near Term
Taking into account the latest data from the Chicago Mercantile Exchange Group's crude futures market, open interest in crude oil contracts decreased for the second consecutive day on Wednesday, with a decline of approximately 59,300 contracts. Trading volume also decreased by around 52,300 contracts, ending a two-day increase.
Technical Analysis: Short-term Resistance Slightly above $77 Per Barrel
The simultaneous decrease in open interest and trading volume on Wednesday suggests that oil prices will rebound further in the short term. In this regard, short-term resistance remains slightly above the $77 level, which was the July high, and this area appears to be reinforced by the 200-day SMA moving average.
