WTI attracts some sellers below $80.00 amid demand worries in China
|- WTI price extends decline near $79.50 in Wednesday’s Asian session.
- Chinese demand concerns weigh on the WTI price.
- Rising bets on a Fed rate cut in September might limit the black gold’s downside.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $79.50 on Wednesday. WTI price edges lower as fears about a sluggish Chinese economy hurt oil demand.
The weaker Chinese economic data on Tuesday exerts some selling pressure on the black gold as China is the world's largest crude oil importer. "Weaker economic data continues to flow from China as continued government support programs have been disappointing, with many of China's refineries cutting back on weaker fuel demand," said Dennis Kissler, senior vice president of trading at BOK Financial.
China’s economy expanded 4.7% YoY in the second quarter (Q2), compared to a 5.3% expansion in the first quarter, according to the National Bureau of Statistics (NBS) on Monday. Meanwhile, China’s Retail Sales came in weaker than expected, climbing 2.0% YoY in June versus 3.1% expected and 3.7% prior.
Nonetheless, the rising odds that the US Federal Reserve (Fed) would cut interest rates might limit the downside for WTI. Fed Chair Jerome Powell said on Monday that the US central bank has "more good" inflation data and could pave the way for its first interest rate cut later this year. Traders are now pricing in a 100% chance of a Fed rate cut in September, up from 70% a month ago, according to the CME FedWatch Tool.
Elsewhere, crude oil inventories in the United States for the week ending July 12 fell by 4.44 million barrels from a decline of 1.9 million barrels in the previous week, according to the American Petroleum Institute (API). Stocks on average were expected to fall by 33,000 barrels 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 13 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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