- WTI consolidates its recovery gains registered over the past two days amid mixed cues.
- Concerns about slowing demand in China and the US cap the upside for Crude Oil prices.
- Dovish Fed-inspired broad-based USD weakness offers support and helps limit losses.
West Texas Intermediate (WTI) US crude Oil prices struggle to capitalize on a two-day-old recovery move from the lowest level since May 2023 and oscillate in a range around mid-$68.00s through the first half of the European session on Friday.
Despite worries about output disruptions caused by Hurricane Francine in the US Gulf of Mexico, a dismal demand outlook is seen as a key factor acting as a headwind for the black liquid. In fact, both the Organization of Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) lowered their demand growth forecasts earlier this week. This, to a larger extent, overshadows worries about output disruptions caused by Hurricane Francine in the US Gulf of Mexico and caps the upside for Crude Oil prices.
Meanwhile, the softer-than-expected US Producer Price Index (PPI) report released on Thursday lifted bets for a larger interest rate cut by the Federal Reserve (Fed) at its upcoming policy meeting on September 17-18. This, in turn, drags the yield on the benchmark 10-year US government bond to its lowest level since May 2023. Apart from this, the prevalent risk-on mood across the global equity markets weighs on the safe-haven US Dollar (USD) and lends support to the USD-denominated commodities, including Crude Oil prices.
Nevertheless, the black liquid remains on track to register modest weekly gains for the first time in the previous five, though the aforementioned fundamental backdrop warrants some caution before positioning for any further appreciating move. Traders might also prefer to wait on the sidelines ahead of next week’s central bank event risk – the outcome of the highly-anticipated FOMC monetary policy meeting on Wednesday.
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.
