WTI climbs to near $67.00 despite persistent concerns over Oil oversupply
- WTI price gains support as a weaker US jobs report prompted the odds of two Fed rate cuts.
- Oil prices may further decline as OPEC+ decided to increase output by 547,000 barrels per day in September.
- Chinese Oil producers are expected to double their output in Iraq to 500,000 barrels per day by approximately 2030.
West Texas Intermediate (WTI) Oil price rebounds after two days of losses, trading around $66.90 per barrel during the early European hours on Monday. The prices of crude Oil also drew support after weaker labor market data in the United States (US) was released on Friday, which prompted market reaction to price in two interest rate cuts by the Federal Reserve (Fed). Traders are now pricing in 63 basis points (bps) of cuts by year-end, up from around 34 bps on Thursday, with the first cut seen in September.
However, the upside of the crude Oil prices could be restrained as the Organization of the Petroleum Exporting Countries and its allies, the group known as OPEC+, decided to increase production for September. The OPEC+ plans to raise output by 547,000 barrels per day next month, aiming to regain market share amid potential supply disruptions linked to Russia.
US President Donald Trump has threatened to impose 100% secondary tariffs on Russian crude buyers to pressure Moscow to end its war in Ukraine by August 8. LSEG trade flows showed on Friday that at least two vessels loaded with Russian Oil bound for refiners in India have diverted to other destinations following new US sanctions, per Reuters.
China’s smaller Oil companies are investing billions of dollars in Iraq to significantly expand their presence in OPEC’s second-largest producer. Attracted by more favorable contract terms, these smaller Chinese producers are projected to double their output in Iraq to 500,000 barrels per day by around 2030.
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
Akhtar Faruqui
FXStreet
Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.
