WTI hovers around $78.00, steadies ahead of US PCE inflation
|- WTI price remains on track for a third straight week of decline on Friday.
- Chinese growth concerns put pressure on crude Oil prices.
- Oil demand could be affected due to diminished odds for the Fed rate cuts in September.
West Texas Intermediate (WTI) Oil price holds mild losses, possibly driven by better-than-expected US economic data. The WTI price hovers around $78.00 per barrel during early European hours on Friday. Crude Oil prices are set for a third consecutive week of decline, primarily due to sluggish demand in China, the world's largest crude importer.
Concerns about the weak Chinese economy were heightened by an unexpected rate cut from the People's Bank of China (PBoC) on Monday. China's Q2 growth was 4.7%, the weakest increase since early 2023. The People’s Bank of China (PBOC), cut the one-year Medium-term Lending Facility (MLF) rate from 2.50% to 2.30% on Thursday.
The prices of crude Oil are facing challenges due to growing expectations of a ceasefire agreement for the Gaza conflict and related violence in the Middle East. US Vice President Kamala Harris, the likely Democratic presidential nominee for the November election, pressured Israeli Prime Minister Benjamin Netanyahu on Thursday to facilitate a Gaza ceasefire deal to alleviate the suffering of Palestinian civilians. Harris stated "It is time for this war to end,” per Reuters.
Stronger US economic data have diminished expectations for the Federal Reserve’s (Fed) rate cuts in September, potentially putting pressure on the demand for crude Oil. Higher interest rates negatively affect economic activities in the United States (US), the largest crude consumer, thereby dampening Oil demand. According to CME Group’s FedWatch Tool, markets now indicate an 88.6% probability of a 25-basis point rate cut at the September Fed meeting, down from 94.0% a week earlier.
Traders are likely anticipating the release of the US Personal Consumption Expenditures (PCE) Price Index for June, scheduled for Friday. This data will show changes in the prices of goods and services purchased by consumers in the United States.
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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