- A combination of factors continues to act as a tailwind for Crude Oil prices on Friday.
- Worries about sluggish demand in China keep a lid on any meaningful appreciation.
- Traders also seem reluctant and look to the US PCE Price Index for a fresh impetus.
West Texas Intermediate (WTI) US crude Oil prices edge higher during the Asian session on Friday and look to build on the overnight bounce from the $75.75 area, or the lowest level since June 10. The commodity currently trades just above the $78.00 mark, up over 0.10% for the day, though remains on track to register the third straight week of losses.
The stronger-than-expected US Gross Domestic Product (GDP) print released on Thursday raised hopes for increasing demand in the world's largest fuel consumer and turned out to be a key factor acting as a tailwind for Crude Oil prices. Furthermore, bets that the Federal Reserve (Fed) will begin its policy-easing cycle in September keep the US Dollar (USD) depressed below a two-week high touched on Wednesday and lend additional support to the commodity.
That said, concerns over sluggish growth in China – the world's top Oil importer – hold back traders from placing aggressive bullish bets around the black liquid and should cap any meaningful appreciating move. The worries were fueled by the GDP data released last week, which showed the Chinese economy grew less than expected in the second quarter. Hence, it will be prudent to wait for strong follow-through buying before positioning for any further gains.
Market participants might also prefer to wait on the sidelines ahead of the release of the US Personal Consumption Expenditures (PCE) Price Index, due later during the early North American session. The crucial inflation data should influence the Fed's rate-cut path, which will drive the USD demand and determine the next leg of a directional move for Crude Oil prices, which, so far, has been showing some resilience below the key 200-day Simple Moving Average (SMA).
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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