- WTI drifts lower for the third straight day despite OPEC+ decision to delay production rise.
- Concerns about a slowing demand in China overshadow geopolitical risks and exert pressure.
- Traders now look to the US NFP report, which will drive the USD and provide a fresh impetus.
West Texas Intermediate (WTI) US Crude Oil prices remain under some selling pressure for the third consecutive day on Friday and trade near the lower end of the weekly range, around the $67.80 region during the Asian session.
The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, on Thursday, postponed planned supply increases by three months until April and extended the full unwinding of cuts by a year until the end of 2026. The announcement suggested that the cartel is worried about a potential supply glut and a slowdown in global demand, especially in China – the world's top oil importer. This, in turn, is seen as a key factor weighing on the black liquid.
Meanwhile, the worsening Russia-Ukraine conflict and increasing tensions in the Middle East keep geopolitical risks premium in play. Furthermore, signs of US economic resilience, along with hopes that US President-elect Donald Trump's expansionary policies will boost fuel demand, could act as a tailwind for Crude Oil prices. Traders might also refrain from placing aggressive directional bets and opt to wait for the release of the key US Nonfarm Payrolls (NFP) report.
The closely watched US jobs data will play a key role in influencing the interest rate outlook in the US, which, in turn, will drive the US Dollar (USD) demand and provide some meaningful impetus to the commodity. Meanwhile, the lack of buying and the aforementioned fundamental backdrop favors bearish traders. This, in turn, suggests that any attempted recovery in Crude Oil prices could be seen as a selling opportunity and runs the risk of fizzling out rather quickly.
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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