WTI softens below $71.00, ongoing geopolitical tensions might cap its downside

• WTI price drifts lower to near $70.80 in Friday's Asian session. 
• Ongoing Middle East geopolitical tensions, prospects of further Fed rate cuts this year could support the WTI price. 
• The weaker oil demand in China might weigh on the WTI.

West Texas Intermediate (WTI), the US crude Oil benchmark, is trading around $70.80 on Friday. WTI price edges lower amid some profit-taking. However, the downside of the WTI price might be limited as geopolitical tensions in the Middle East continue to escalate and the Federal Reserve (Fed) is likely to cut more interest rates in the months to come.

Israeli warplanes and artillery attacked Hezbollah in southern Lebanon on Thursday. The action came after the militia's pagers and walkie-talkies exploded last week, killing scores and injuring thousands across Lebanon, according to CNBC. "We continue to highlight Lebanon as the main pathway to oil disruption through direct Iranian involvement in a wider regional war," said Helima Croft, head of global commodity strategy at RBC Capital Markets.

The US Fed decided to cut its interest rates by half a percentage point at its September meeting on Wednesday. The new "dot plots" suggest a gradual easing cycle, with the 2024 median revised to 4.375% versus the 5.125% projection in June. Lower interest rates generally support the WTI price as it reduces the cost of borrowing, which can boost economic activity and oil demand.

Declining US crude stockpiles might support oil prices in the near term. According to the US Energy Information Administration (EIA), crude oil stockpiles in the United States for the week ending September 13 decreased by 1.63 million barrels, compared to a decline of 0.833 million barrels in the previous week. The market consensus estimated that stocks would decline by just 0.1 million barrels.

On the other hand, the concerns about weaker oil demand and the economic slowdown in China might cap the black gold's upside. Statistics Bureau data showed Chinese Industrial Production growth slowed to a five-month low in August and Retail Sales weakened further.