WTI aims to resume upside journey on the back of Fed dovish bets
- The Oil price attracts slight bids at open on Monday as the US Dollar extends its corrections.
- The OPEC+ is expected to announce a further increase in Oil production.
- Iraq’s federal government is set to pump Oil into international markets through Turkey.
West Texas Intermediate (WTI), futures on NYMEX, strives to gain ground slightly below $65.00 during the Asian trading session on Monday. The Oil price attracts slight bids as the US Dollar extends its correction amid firm expectations that the Federal Reserve (Fed) will cut interest rates in the October policy meeting.
During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.25% lower to near 97.90.
The Oil price corrected on Friday after posting a fresh seven-week high of around $66.20 the same day. The black gold faced selling pressure on hopes that the Organization of the Petroleum Exporting Countries (OPEC) and their allies, which are collectively known as OPEC+, will raise the Oil output again in the meeting scheduled on October 5.
A report from Reuters showed that OPEC+ will likely approve another crude production hike of at least 137,000 bpd at its meeting on Sunday. A hike in Oil production at a time when the global demand has been impacted by the United States (US) tariffs-driven trade war will be an unfavourable scenario for the Oil price.
Another reason behind corrections in the Oil price came on the back of an agreement between Iraq’s federal government and the Kurdistan regional government, aiming to infuse 180,000 to 190,000 barrels per day (bpd) of crude into the global market through Turkey’s Ceyhan port, which has also weighed on the Oil price.
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.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
