- WTI price gains ground due to the potential approach of a hurricane toward the US Gulf Coast.
- An adverse weather is expected to become a hurricane before reaching the northwestern US Gulf Coast.
- The rising odds of a Fed rate cut in September provide support for the Oil prices.
West Texas Intermediate (WTI) Oil price recovers its recent losses registered in the previous session, trading around $68.00 per barrel during Monday’s Asian hours. The uptick in crude Oil prices is attributed to the potential approach of a hurricane toward the US Gulf Coast.
The US National Hurricane Center (NHC) reported on Sunday that adverse weather in the southwestern Gulf of Mexico is expected to strengthen into a hurricane before reaching the northwestern US Gulf Coast. This region accounts for approximately 60% of US refining capacity, according to Reuters.
Reuters also cited ANZ analysts noting that "Crude Oil recorded its biggest weekly fall in 11 months amid a darkening economic backdrop. Weak jobs data in the US on Friday raised concerns over flagging Oil demand in the world's biggest consumer."
The US Bureau of Labor Statistics (BLS) reported that Nonfarm Payrolls (NFP) added 142,000 jobs in August, below the forecast of 160,000 but an improvement from July’s downwardly revised figure of 89,000.
Weak US jobs data increased the likelihood of a 25 basis-point rate cut by the Federal Reserve (Fed) at its September meeting. Lower interest rates generally boost Oil demand by stimulating economic growth and making Oil cheaper for holders of non-dollar currencies.
According to the CME FedWatch Tool, markets are fully anticipating at least a 25 basis point (bps) rate cut by the Federal Reserve at its September meeting.
Additionally, Chicago Fed President Austan Goolsbee remarked on Friday that Fed officials are starting to align with the broader market's sentiment that a policy rate adjustment by the US central bank is imminent, according to CNBC.
FXStreet’s FedTracker, which uses a custom AI model to evaluate Fed officials' speeches on a dovish-to-hawkish scale from 0 to 10, rated Goolsbee's comments as dovish, assigning them a score of 3.2.
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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