WTI consolidates around mid-$62.00s; looks to US NFP for fresh impetus
- WTI lacks firm intraday direction, though it remains on track to register weekly gains.
- The US-China trade talks raise hopes for fuel demand growth and support Oil prices.
- A bearish USD also acts as a tailwind for the commodity ahead of the US NFP report.
West Texas Intermediate (WTI) US Crude Oil prices oscillate in a narrow band, around mid-$62.00s during the Asian session on Friday, and remain on track to register gains for the first time in three weeks.
Hopes for the resumption of US-China trade talks lift expectations for strong fuel demand in the world's two largest economies, which, in turn, act as a tailwind for the black liquid. In fact, US President Donald Trump and Chinese President Xi Jinping spoke on Thursday and agreed that officials from both sides will meet soon for more talks to resolve the ongoing trade war.
Furthermore, a hit to Canadian supply from wildfires turns out to be another factor lending support to Crude Oil prices amid persistent geopolitical risks stemming from the protracted Russia-Ukraine war and conflicts in the Middle East. Adding to this, the underlying bearish sentiment surrounding the US Dollar (USD) is seen underpinning the USD-denominated commodity.
Traders, however, seem reluctant to place aggressive directional bets around Crude Oil prices and opt to wait for the release of the closely-watched US monthly employment details. The popularly known US Nonfarm Payrolls (NFP) report will play a key role in influencing market expectations about the Federal Reserve's (Fed) future rate-cut path and driving the USD demand.
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
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
