- WTI jumps to over a two-week high on Wednesday amid the emergence of fresh USD selling.
- The Fed’s oversized rate cut, along with a positive risk tone, undermines the safe-haven buck.
- Concerns about slowing global fuel demand might cap any further gains for Crude Oil prices.
West Texas Intermediate (WTI) US crude Oil prices regain positive traction after Wednesday's modest pullback and build on the recent recovery from the $64.75 area or the lowest level since May 2023 touched last week. The buying interest remains unabated through the first half of the European session and lifts the commodity to over a two-week high, closer to the $71.00 mark.
The Federal Reserve's (Fed) decision to start its policy easing cycle by lowering borrowing costs by 50 basis points on Wednesday fueled optimism over a pickup in economic activity and energy demand. This, along with the emergence of fresh US Dollar (USD) selling, turn out to be key factors pushing Crude Oil prices higher. Furthermore, the risk of a further escalation of tensions in the Middle East, especially after walkie-talkies used by the Lebanese armed group Hezbollah exploded on Wednesday, acting as a tailwind for the commodity.
Meanwhile, government data released on Wednesday showed a bigger-than-expected draw in US crude inventories, though was offset by builds in distillates and gasoline stockpiles. Adding to this, lingering concerns about weak global demand might cap any further appreciating move for Crude Oil prices. In fact, both the Organization of Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) lowered their demand growth forecasts earlier this month amid persistent worries about a slowdown in China.
The concerns resurfaced following the release of poor Chinese macro data over the weekend, which pointed to signs of weakness in the world's largest economy and top Oil importer. This, in turn, warrants some caution for aggressive bullish traders and before positioning for an extension of the upward trajectory witnessed over the past week or so. Traders now look forward to the US macro data – Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index and Existing Home Sales data – to grab short-term opportunities.
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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