WTI holds below $72.00 as wider Middle East conflict fade
|- WTI price trades in negative territory for the fifth consecutive day in Wednesday’s early Asian session.
- WTI price declines as worries of a wider Middle East conflict fade, but rising bets on a Fed rate cut might limit its losses.
- Crude inventories fell by 4.65 million barrels to 426.03 million last week, according to the EIA.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $71.70 on Thursday. WTI price edges lower on the back of easing fears of a wider Middle East war. However, firmer expectations of the Federal Reserve (Fed) rate cut in September after the FOMC Minutes might cap its downside.
WTI prices have edged lower as Iran has refrained so far from attacking Israel in response to the killing of a senior Hamas leader in Tehran in late July. The United States hoped that a cease-fire in Gaza would prevent a wider war in the region. "Oil prices are falling, extending losses from the previous week amid ongoing concern over demand in China and amid progress in Middle Eastern ceasefire talks," said City Index analyst Fiona Cincotta.
On the other hand, a decline in US oil inventories and the minutes from the US Fed indicating a likely September rate cut might lift the black gold. The US crude inventories hit a seven-month low last week. According to the Energy Information Administration (EIA), crude oil stockpiles in the United States for the week ending August 21 fell by 4.65 million barrels to 426.03 million, compared to an increase of 1.36 million barrels in the previous week. The market consensus estimated that stocks would decline by 2.8 million barrels.
According to the Fed minutes of the July 30-31 meeting, “the vast majority” of participants indicated that it would likely be appropriate to ease policy at the next meeting if the data continued to meet expectations.
Oil traders will monitor the preliminary US S&P Global Purchasing Managers Index (PMI) for August for fresh impetus. The attention will shift to Fed Chair Jerome Powell’s speech at Jackson Hole on Friday, which might offer some hints about interest rate plans in the future.
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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