WTI remains defensive above $72.30 on concerns over OPEC+ cut and Chinese oil demand

• WTI prices are trading in negative territory, with a loss of 0.04% on the day.
• Moody’s downgraded China’s sovereign credit rating from stable to negative, citing rising risks to growth and a real estate crisis.
• Oil traders are concerned about the effectiveness of voluntary supply cuts by OPEC+.
• US private employment data from ADP and change in oil reserves from EIA will be released on Wednesday.

Western Texas Intermediate (WTI), a benchmark for US crude oil, is trading around $72.30 on Wednesday. Concerns about the effectiveness of OPEC+ supply cuts and concerns about the worsening demand outlook in China are putting some selling pressure on WTI prices.

Early Wednesday, Moody’s downgraded China’s sovereign credit rating from stable to negative. The credit rating agency cites growing risks to growth and a real estate crisis in China. This development warns lenders that the risk of default has increased in recent years. That said, the pessimistic economic outlook in China could limit the rise of WTI, as China is the world’s largest oil consumer.

Last week, the Organization of the Petroleum Exporting Countries and its allies, including Russia (OPEC+), agreed to voluntary supply cuts of about 2.2 million barrels per day (bpd) by the first quarter of 2024. These restrictions include an extension of 1.3 million bpd from voluntary Saudi and Russian cuts. However, this advance does not boost WTI prices as investors doubt how production cuts will be measured.

In terms of data, US crude oil inventories increased by 594,000 barrels in the week ending December 1, compared to the previous reading of 817,000 declines, according to the American Petroleum Institute (API). The market consensus expected a reduction of 2,267,000 barrels.

Later in the day, oil traders will closely monitor US employment developments (ADP) for November and developments in the change in crude oil stocks from the EIA, which will be released on Wednesday. Non-Farm Payrolls (NFP) will be published on Friday. This data could have a significant impact on the price of WT. Oil traders will follow the data and find trading opportunities around WTI prices.