WTI drops to near $66.00 due to concerns over OPEC+ output increase
- WTI price declines as bearish market sentiment persisted amid concerns over OPEC+’s decision to raise output.
- The OPEC+’s production increase of 138,000 barrels per day marks its first rise since 2022.
- The latest EIA report showed US crude Oil stockpiles grew by 3.614 million barrels for the week ending February 28.
West Texas Intermediate (WTI) crude Oil price extends its losing streak for the fifth successive day, trading around $66.00 per barrel during European trading hours on Thursday. However, crude Oil found some support following comments from a US official suggesting that President Donald Trump may consider removing the 10% tariff on Canadian energy imports that comply with trade agreements.
The Oil price faces challenges as market sentiment remained bearish amid concerns over OPEC+’s decision to increase output. The alliance, which includes the Organization of the Petroleum Exporting Countries (OPEC), Russia, and other partners, confirmed its plan to boost production in April. This move follows renewed pressure from President Trump on OPEC and Saudi Arabia to lower Oil prices. According to Reuters calculations, the production increase amounts to 138,000 barrels per day, marking the first rise from OPEC+ since 2022.
Market strategist Yeap Jun Rong of IG told Reuters, "The sharp dip in Oil prices below the key $70.00 level may prompt a slight breather in today's session, as technical conditions attempt to stabilize from oversold territory." However, he noted that "recovery momentum remains fragile, with unfavorable supply-demand dynamics weighing on bullish sentiment."
Meanwhile, data from the US Energy Information Administration (EIA) showed that crude inventories rose more than expected, reinforcing concerns about oversupply. The weekly report showed that US crude Oil stockpiles rose by 3.614 million barrels for the week ending February 28, reversing the previous week’s decline of 2.332 million barrels. This buildup exceeded market expectations, which had projected a decrease of 290,000 barrels.
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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