- WTI struggles to gain traction and languishes near a two-week trough touched on Tuesday.
- A surprise rise in US crude inventories and easing Middle East tensions weigh on Oil prices.
- China’s economic woes keep bulls on the sidelines and act as a headwind for the commodity.
West Texas Intermediate (WTI) US crude Oil prices trade with a mild negative bias below the $73.00 mark during the Asian session on Wednesday and remain within the striking distance of a two-week low touched the previous day.
Concerns about supply disruptions from the Middle East eased after US Secretary of State Antony Blinken said on Monday that Israeli Prime Minister Benjamin Netanyahu had accepted a proposal to tackle disagreements blocking a ceasefire deal in Gaza. Apart from this, a surprise rise in US crude inventories continues undermining Crude Oil prices.
According to American Petroleum Institute figures released on Tuesday, US crude oil stocks rose by 347,000 barrels in the week ended August 16, which pointed to oversupply in the world's biggest consumer of oil. This comes on top of worries about a slowdown in China – the world's top Oil importer – and further acts as a headwind for the commodity.
Meanwhile, investors remain concerned about the ongoing clashes between Israel and Hamas, despite the ongoing ceasefire negotiations. Furthermore, Hamas said that the US-backed bridging proposal conveyed at the end of the talks in Doha on Friday was a reversal of what the parties had agreed on in early July, keeping investors on edge.
Apart from this, the prevalent US Dollar (USD) selling bias, fueled by the growing acceptance that the Federal Reserve (Fed) will begin its rate-cutting cycle in September, could lend some support to Crude Oil prices and help limit further losses. Traders now look to the official inventory data from the US Energy Information Administration (EIA) later today.
The focus, however, remains on geopolitical developments and the release of the July FOMC meeting minutes. The latter, along with Fed Chair Jerome Powell's speech at the Jackson Hole Symposium on Friday, should offer cues about the US central bank's policy path. This, in turn, will drive the USD and provide a fresh impetus to Crude Oil prices.
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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