- WTI is seen consolidating the overnight strong gains amid mixed fundamental cues.
- Middle East tensions act as a tailwind, though renewed USD buying caps the upside.
- The fundamental backdrop favors bulls and should lend support to the black liquid.
West Texas Intermediate (WTI) US crude Oil prices struggle to capitalize on the previous day's strong move up and oscillate in a narrow range through the early European session on Thursday. The commodity currently trades around the $78.00 mark, with bulls awaiting a sustained strength beyond the 200-day Simple Moving Average (SMA) before positioning for any further gains.
Against the backdrop of Israel's retaliation against Iran-backed Lebanese group Hezbollah, the killing of Hamas leader Ismail Haniyeh in Tehran keeps the risk of a broader Middle East conflict in play. This, in turn, raises worries about supply disruptions from the key Oil producing region, which, along with data showing US inventories shrank more than expected for a fifth week in a row, acts as a tailwind for the black liquid.
The Energy Information Administration (EIA), in its report published on Wednesday, stated that crude oil inventories in the US went down by 3.4 million barrels to 433.0 million barrels during the week ending July 26. The reading was well below consensus estimates for a decline of 1.6 million barrels and pointed to strong fuel demand. That said, China's economic woes keep a lid on any meaningful upside for Crude Oil prices.
Apart from this, the emergence of some US Dollar (USD) buying turns out to be another factor holding back traders from placing fresh bullish bets around the USD-denominated commodity. Meanwhile, a goodish USD recovery from a three-week low runs the risk of fizzling out rather quickly amid the Federal Reserve's (Fed) dovish outlook. This suggests that the path of least resistance for Crude Oil prices is to the upside.
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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