- WTI consolidates the overnight gains and oscillates in a narrow band on Friday.
- Geopolitical tensions and supply distortion concerns offer support to Oil prices.
- The recent USD bullish run keeps a lid on any further gains for the commodity.
West Texas Intermediate (WTI) US crude Oil prices struggle to capitalize on the previous day's strong move up and oscillate in a narrow band, around the $75.00/barrel mark during the Asian session on Friday.
The markets remained concerned about a potential Israeli attack on Iranian oil infrastructure, which keeps the geopolitical risk premium in play and acts as a tailwind for the black liquid. In fact, Israeli Defence Minister Yoav Gallant promised earlier this week that any strike against Iran would be "lethal, precise and surprising". Apart from this, worries about supply disruptions caused by Hurricane Milton in the United States (US), along with the upbeat demand outlook, further lend support to Crude Oil prices.
Investors turned optimistic that China's massive stimulus measures will ignite a lasting recovery in the world's second-largest economy and lift fuel demand in the world's largest oil importer. Moreover, the markets seem confident that further interest rate cuts by the Federal Reserve (Fed) will boost economic activity and demand for oil. That said, stronger-than-expected US inflation data sparked some doubts over how much rates will fall in the coming months, which, in turn, caps the upside for Crude Oil prices.
Apart from this, the recent US Dollar (USD) rally to its highest level since mid-August, bolstered by diminishing odds for a more aggressive Fed policy easing, acts as a headwind for the commodity. Nevertheless, Crude Oil prices remain on track to register gains for the second straight week. That said, a sharp pullback from the vicinity of the $78.00 mark, or a nearly two-month high touched on Tuesday, warrants caution before positioning for an extension of the recovery from the year-to-day (YTD) low touched in September.
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 12 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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