WTI rebounds to near $56.50, oversupply fears might cap gains
|- WTI price recovers to near $56.50 in Tuesday’s early European session.
- Concerns over a swelling oil surplus and US-China trade tensions could weigh on the WTI price.
- Traders await the API weekly crude oil stock report later on Tuesday ahead of US-China trade talks.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $56.50 during the early European trading hours on Tuesday. The WTI remains on the defensive amid concerns over excess supply. Traders will closely monitor the American Petroleum Institute (API) weekly crude oil stock report later on Tuesday, along with trade talks between the US and China later this week.
The Organization of the Petroleum Exporting Countries and its allies (OPEC+) have pushed ahead with plans to increase oil supply. This has led analysts to predict a surplus of crude this year and next year. The International Energy Agency (IEA) last week projected a global surplus of nearly 4 million barrels per day in 2026.
The US and China are expected to discuss trade at a meeting in Malaysia later this week, ahead of a meeting between US President Donald Trump and Chinese President Xi Jinping later this month. Any signs of escalating trade tensions between the world's top two oil consumers could add to concerns about an economic slowdown and weaker energy demand, which might drag the WTI price lower.
On the other hand, the expectation that the US Federal Reserve (Fed) will deliver another quarter-point rate cut in the October policy meeting could help limit the WTI’s price losses. Traders are currently pricing in nearly a 99% possibility that the US central bank will cut interest rates again next week, followed by another reduction in December, according to the CME FedWatch tool. A Fed rate cut bet generally weakens the US Dollar (USD) and supports the USD-denominated commodity price, as a softer USD makes crude cheaper for foreign buyers.
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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