- WTI lacks bullish conviction and is influenced by a combination of factors.
- A modest USD recovery and China’s economic woes act as a headwind.
- The mixed setup warrants some caution before placing directional bets.
West Texas Intermediate (WTI) US crude Oil prices build on the previous day's solid rebound from the 50-day Simple Moving Average (SMA) support and climb to a fresh weekly peak during the Asian session on Thursday. The commodity, however, struggles to capitalize on the move and currently trades around the $81.65 region, nearly unchanged for the day.
The US Dollar (USD) attracts some buyers and reverses a part of the previous day's slump to a nearly four-month low, which, in turn, is seen as a key factor acting as a headwind for the USD-denominated Crude Oil prices. Apart from this, signs of slowing economic growth in China – the world's top oil importer – contribute to capping the black liquid. The downside, however, remains cushioned in the wake of a bigger-than-expected weekly drop in US crude stockpiles.
Data published by the Energy Information Administration (EIA) on Wednesday showed a third straight weekly decline in US crude inventories, by 4.9 million barrels compared to a 4.4 million drop reported by the American Petroleum Institute. Moreover, the attempted USD recovery runs the risk of fizzling out rather quickly amid bets that the Federal Reserve (Fed) will cut rates in September. This, in turn, supports prospects for some meaningful upside for Crude Oil prices.
Even from a technical perspective, failure to find acceptance below the 100-day SMA and the overnight bounce from the 50-day SMA pivotal support suggests that the path of least resistance for the commodity is to the upside. That said, mixed oscillators on the daily chart warrant some caution before confirming that the recent retracement slide from the vicinity of the $84.00 mark, or over a two-month peak touched on July 5 has run its course and positioning for any further gains.
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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