US oil retreats from a 12-month peak on profit taking, hawkish Fed

Despite encouraging US economic data, and at the time of writing, WTI crude has dropped 2.17% to $90.77 from a 12-month high of $94.99. Despite slowing inflation, the US economy grew by 2.1% in the second quarter and is projected to rise by 4.9% in the third. However, as Republicans and Democrats argue about the 2024 Federal Government budget, a potential US government shutdown looms and adds volatility to the markets.

With US shares trading in positive territory, market mood increased. According to the most recent US economic data, inflation slowed and there was a stable rise of 2.1% in Q2 2023. Estimated GDP growth for the third quarter is 4.9%. If the US has a shutdown, the narrative may alter as Republicans and Democrats debate the budget for the Federal Government in 2024. During the week, the majority of Federal Reserve officials maintained their hawkish views, with some adopting a more neutral stance.

Last week saw a 2.2 million barrel drop in the most recent US crude oil stocks, bringing them to their lowest level since July 2022. While oil is anticipated to continue trading over $90.00 per barrel, the Relative Strength Index (RSI) is emerging from overbought circumstances. The $90.00 level would be exposed if the daily high of $92.63 from September 19 were to be breached, and the psychological $95.00 level would be in play if prices resume their upward trend.