Global economic concerns, pessimistic outlook drag WTI lower

WTI crude oil prices have been affected by global economic concerns and a pessimistic outlook. Goldman Sachs has revised its forecast for WTI crude oil from $89 a barrel to $81 by the end of the year due to expectations of increased oil supplies from Russia and Iran. This downward revision has contributed to the decline in WTI crude oil prices. Earlier during the US trading session, WTI crude oil nosedived to $66.80. The American crude is trading at $67.33 per barrel at the time of writing.

The ongoing global economic deceleration has also contributed to the decline in WTI crude oil prices. Analysts have slashed oil price forecasts ahead of the release of inflation data in the United States (US) and the Federal Reserve (Fed) meeting on Wednesday. The anticipated US inflation data and Fed’s meeting are closely watched as they influence the oil market. Wall Street is trading with solid gains at the start of the week.

Last week’s data from China showed that exports contracted above estimates, indicating a grim outlook for global demand amongst developed markets. Alongside speculations that the People’s Bank of China (PboC) will reduce rates to stimulate the economy, this triggered Monday’s drop despite OPEC+’s efforts to cushion oil prices.

The US will reveal the CPI data for May, which is expected to show the impact of 500 basis points (bps) of rate hikes by the Fed. Upward surprises on the data would likely trigger a reaction by the Fed, as Jerome Powell and Co would reveal its decision on Wednesday at around 18:00 GMT.

Further Fed increases would boost the US Dollar (USD), which is a headwind for dollar-denominated assets. However, WTI’s fall was capped by Saudi Arabia, which pledged to cut oil production in July.

In summary, WTI crude oil prices have been affected by global economic concerns and a pessimistic outlook. Goldman Sachs has revised its forecast for WTI crude oil from $89 a barrel to $81 by the end of the year due to expectations of increased oil supplies from Russia and Iran. The ongoing global economic deceleration has also contributed to this decline.

The anticipated US inflation data and Fed’s meeting are closely watched as they influence the oil market. Wall Street is trading with solid gains at the start of the week. Last week’s data from China showed that exports contracted above estimates, indicating a grim outlook for global demand amongst developed markets. Alongside speculations that PboC will reduce rates to stimulate the economy, this triggered Monday’s drop despite OPEC+’s efforts to cushion oil prices. The US will reveal CPI data for May, which is expected to show the impact of 500 basis points (bps) of rate hikes by Fed. Further Fed increases would boost USD, which is a headwind for dollar-denominated assets. However, WTI’s fall was capped by Saudi Arabia, which pledged to cut oil production in July.

US crude oil benchmark fell below May’s low of $67.08, opening the door for further losses, beneath the $67.00 mark, putting into play March’s 20 swing low at $64.41, ahead of challenging the year-to-date (YTD) low of $63.61. On the upside, WTI’s first resistance would be the 2022 low of $70.10, followed by the 20-day Exponential Moving Average (EMA) at $71.23. A breach of the latter will expose the 50-day EMA at $72.97.