WTI attracts some buyers above $76.00 on Fed rate cut expectations, Middle East geopolitical risks
- WTI price extends the rally to near $76.15 in Monday’s Asian session, gaining 0.45% on the day.
- Fed’s dovish stance and rising geopolitical tensions in the Middle East further boost the WTI price.
- The weaker demand outlook in China could weigh on the black gold.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $76.15 on Monday. WTI price edges higher on the back of firmer expectations that the Federal Reserve (Fed) will cut interest rates in its upcoming September meeting.
WTI gains ground after the dovish comments by Fed Chair Jerome Powell indicated the US central bank was preparing to cut interest rates. Fed’s Powell gave a clear signal on Friday at the Jackson Hole symposium that it’s time to start cutting the target range for the federal funds rate at the next meeting on September 17-18. Lower interest rates generally support the WTI price as it reduces the cost of borrowing, which can boost economic activity and oil demand.
The fears that wider conflict in the Middle East could disrupt regional oil supplies have lifted the WTI price in the previous sessions. Reuters reported that Hezbollah launched hundreds of rockets and drones at Israel early on Sunday, as Israel's military said it carried out a wave of pre-emptive strikes across southern Lebanon to thwart a large-scale rocket and drone attack by Hezbollah.
On the other hand, a sluggish economy and slowing oil demand in China might drag the black gold lower as China is the world’s top oil importer. China's oil demand increased by 200,000 barrels per day in the first half of 2024 compared to the previous year, which was three times below the average rise of 600,000 bpd from 2016 to 2019, noted Daan Struyven, head of oil research at Goldman Sachs.
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.
Author
Lallalit Srijandorn
FXStreet
Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.
