WTI trades with modest losses above $70.00, bearish bias remains
- WTI remains on the back foot near a two-week low and is pressured by a combination of factors.
- Easing fears of supply disruptions and demand concerns continue to weigh on the black liquid.
- Bets for smaller Fed rate cuts underpin the USD and support prospects for a further downfall.
West Texas Intermediate (WTI) US Crude Oil prices struggle to capitalize on the overnight modest bounce from the $69.25 area, or a two-week low and attract some sellers during the Asian session on Wednesday. The commodity currently trades around the $70.25 region, down 0.30% for the day, and seems vulnerable to decline further.
Despite worries about an escalation of conflict in the Middle East, reports that Israel would not strike Iranian nuclear and oil sites eased fears of a supply disruption. This comes on top of a fall in China's oil imports for the fifth straight month raised concerns about weak demand in the world's top importer. Adding to this, OPEC lowered its forecast for global oil demand growth in 2024 and 2025 and in turn, validates the negative outlook for Crude Oil prices.
Meanwhile, the US Dollar (USD) stands tall near its highest level since August 8 amid firming expectations for a less aggressive policy easing by the Federal Reserve (Fed) and bets for a regular 25 basis points (bps) interest rate cut in November. A stronger buck tends to undermine demand for USD-denominated commodities and supports prospects for an extension of the recent fall from the vicinity of the $78.00 mark, or the monthly peak touched last week.
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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