The International Energy Agency (IEA) reported a significant supply deficit starting in September due to reduced OPEC+ output. This tightening of supply resulted from voluntary production cuts by major oil producers, Saudi Arabia and Russia, who have committed to extending these cuts until the end of 2023. Saudi Arabia, in particular, will reduce its oil production to approximately 1.3 million barrels per day (bpd) for the remainder of 2023.
OPEC remains optimistic about Chinese oil demand for 2023 and expects strong global oil demand growth for both 2023 and 2024, despite challenges like rising interest rates and inflation. The organization anticipates a 2.25 million bpd increase in global oil demand in 2024, a slight dip from the 2.44 million bpd growth projected for 2023.
China's recent economic data has been encouraging. In August, year-over-year Retail Sales grew by 4.6%, surpassing expectations and marking an improvement from the previous month's figure of 2.5%. Industrial Production also exceeded estimates by recording a growth rate of 4.5% in August.
Chinese authorities have reduced the Reserve Requirement Ratio (RRR) by 25 basis points (bps) for a significant portion of the banking system, releasing additional liquidity to potentially support economic growth.
The US Dollar Index (DXY) has retreated from its recent six-month high, currently trading around 105.20. Market participants remain cautious in response to the US Federal Reserve's (Fed) hawkish stance on monetary policy.
US Treasury yields have pulled back, with the 10-year yield correcting at 4.28%. Traders will closely monitor the release of the US preliminary Michigan Consumer Sentiment Index during the North American session, which could provide insights into the economic situation and impact trading bets on the US Dollar.
WTI Crude Oil is trading just below $90, influenced by factors such as supply deficits, OPEC commitments, optimistic Chinese economic data, and cautious market sentiment regarding the US Dollar. As US data unfolds, it may further shape market dynamics and investor sentiment.
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