WTI climbs back closer to mid-$61.00s; upside potential seems limited
- WTI gains some positive traction as renewed USD selling benefits USD-denominated commodities.
- Concerns that US tariffs could lead to a global recession and dent fuel demand might cap Oil prices.
- A surprise OPEC+ supply increase further warrants caution before placing aggressive bullish bets.
West Texas Intermediate (WTI) US Crude Oil prices attract some buyers on Tuesday following the previous day's US tariffs-led volatile price swings and currently trade just below mid-$61.00s, up over 1% for the day.
The US Dollar (USD) attracts fresh sellers and stalls a two-day-old recovery from a multi-month low amid bets that a tariffs-driven US economic slowdown might force the Federal Reserve (Fed) to resume its rate-cutting cycle soon. This, in turn, is seen benefiting USD-denominated commodities and lending some support to Crude Oil prices. Apart from this, the uptick could be attributed to a technical bounce, especially after the recent slump to the lowest since early 2021 touched on Monday.
Any meaningful recovery, however, still seems elusive amid growing concerns that US President Donald Trump's sweeping reciprocal tariffs would trigger an all-out global trade war and weaken fuel demand. Moreover, a surprise decision by eight OPEC+ members, to pull forward a planned production increase and return 411,000 bpd to the market in May sparked oversupply concerns. This might turn out to be another factor that should contribute to capping gains for Crude Oil prices.
Moving ahead, the market focus now shifts to the release of the FOMC meeting minutes on Wednesday. This will be followed by the US Consumer Price Index (CPI) and the Producer Price Index (PPI) on Thursday and Friday, respectively. Apart from this, trade-related developments will play a key role in influencing the USD price dynamics and provide some impetus to Crude Oil prices.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
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