WTI moves below 69.00, further downside seems possible due to stronger US Dollar
- WTI price, denominated in dollars, moves for a weekly decline due to a stronger US Dollar.
- Crude Oil prices struggle as central banks emphasize the need for caution regarding additional rate cuts.
- J.P. Morgan analysts projected that Oil supply will exceed demand by 1.2 million barrels per day next year.
West Texas Intermediate (WTI) Oil price extends its losing streak for the fifth successive session, trading around $68.90 per barrel during the Asian hours on Friday. Crude Oil prices, denominated in dollars, are on track for a weekly decline due to a stronger US Dollar (USD). A higher US dollar makes crude Oil more expensive for buyers using other currencies, which in turn dampens Oil demand.
The US Dollar Index (DXY), which measures the value of the US Dollar against its six major peers, trades hovers around 108.50, the highest level not seen since November 2022, following the Federal Reserve (Fed) implemented a hawkish 25 basis point (bps) rate cut on Wednesday. The Fed’s Summary of Economic Projections, or ‘dot-plot,’ showed only two rate cuts in 2025, down from four cuts projected in September.
Fed Chair Jerome Powell emphasized the need for caution regarding additional rate cuts, noting that inflation is likely to remain persistently above the central bank's 2% target. On Thursday, the Bank of Japan (BoJ) maintained its ultra-low interest rates as President-elect Donald Trump’s tariff threats loomed over Japan's export-driven economy. Meanwhile, the Bank of England (BoE) kept interest rates unchanged, with policymakers divided on the appropriate response to the country’s slowing economic growth.
According to Reuters, J.P. Morgan analysts projected that Oil supply will exceed demand by 1.2 million barrels per day. The Oil market is anticipated to face a surplus next year, as weakening economic activity and a sluggish Chinese economy further dampen growth in crude Oil demand.
Additionally, energy transition measures have significantly affected demand in China. On Thursday, state-owned energy giant Sinopec announced that the country’s gasoline demand is expected to peak by 2027, as diesel and gasoline consumption weakens in the world’s largest oil importer.
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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