WTI loses ground near $68.50 on oversupply concerns, focus on Fed policy

• WTI price faces challenges on weak demand projection due to higher interest rates.
• Crude oil prices receive pressure on oversupply concerns as the US EIA raised its forecast for the 2023 supply estimate by 300,000 bpd from the US.
• Fed is expected to keep interest rate unchanged in its last policy decision of the year.

West Texas Intermediate (WTI) price extends its losses following the US inflation data for November. The WTI price bids around $68.50 per barrel during the Asian session on Wednesday. The dynamics in the Oil market are indeed multifaceted. The pressure on Crude prices, driven by the expected maintenance of the Federal Reserve's current policy stance, reflects concerns over potential economic growth slowdown due to prolonged higher rates.

The adjustment in the US Energy Information Administration's (EIA) forecast, raising the 2023 supply estimate by 300,000 barrels per day (bpd) to 12.93 million bpd, reflects an evolving outlook for oil production in the United States (US). Additionally, the decision to lower the 2024 price forecast for Brent crude by $10 a barrel suggests a recalibration of expectations for future market conditions.

The OPEC+ output cut agreement faces challenges in effectively controlling supplies, and the increased forecast for US oil supply in 2023 adds to the market dynamics. Geopolitical tensions, such as the attack on a Norwegian commercial tanker by Yemen's Houthis in protest against Israel's actions, elevate the risk of supply disruptions in the Middle East.

The energy landscape is further influenced by the COP28 climate summit in Dubai, where negotiators are awaiting a revised deal amid criticism of the previous version for its perceived weakness in not including a clear plan for phasing out fossil fuels.

The anticipation is building up as market participants eagerly await the release of the US Producer Price Index (PPI) and the Federal Reserve's Interest Rate Decision on Wednesday. The expectation for the Federal Open Market Committee (FOMC) to maintain its current policy stance in the December meeting sets the stage for keen investor interest.

All eyes will be on Federal Reserve Chair Jerome Powell's comments, as they could provide valuable insights into potential changes in interest rates for the coming year. The intersection of economic data and Fed decisions could play a significant role in shaping market sentiments and influencing trading strategies in the Crude oil market.