WTI corrects from two-month high near $84.00 amid caution due to Storm Beryl
- WTI price corrects from $84.00 due to uncertainty over the impact of Tropical Storm Beryl.
- Various US ports were closed on Sunday as a precaution against Storm Beryl.
- The prospects of Fed rate cuts in September have increased significantly.
West Texas Intermediate (WTI), futures in NYMEX, extend its correction to near $82.20 in Monday’s Asian session after posting a fresh two-month high near $84.00 on Thursday. The Oil price comes under pressure as investors worry about Storm Berly, which could disrupt United States (US) energy supplies.
Should the Tropical Storm Bery turn into a Category two hurricane, a temporary halt could be seen on crude and liquefied natural gas exports, motor fuel deliveries and oil shipments to refineries.
For precautionary purposes, ports of, Houston, Corpus Christi, Galveston, Texas City and Freeport remained close on Sunday.
Meanwhile, Oil demand worries have eased significantly as a rate cut move by the Federal Reserve (Fed) in its September meeting appears to be a done deal. The CME FedWatch tool shows that the probability for Fed reducing interest rates from their current levels in September has increased to 75.8% from 64%, recorded a week ago.
The expectations for the Fed to begin reducing interest rates from September improved after the US Nonfarm Payrolls (NFP) report of June showed that the strength in the US labor market is easing. The report showed that wage growth softened expectedly, the Unemployment Rate increased and payrolls were higher than expectations but lower from downwardly revised May figures.
Brent Crude Oil FAQs
Brent Crude Oil is a type of Crude Oil found in the North Sea that is used as a benchmark for international Oil prices. It is considered ‘light’ and ‘sweet’ because of its high gravity and low sulfur content, making it easier to refine into gasoline and other high-value products. Brent Crude Oil serves as a reference price for approximately two-thirds of the world's internationally traded Oil supplies. Its popularity rests on its availability and stability: the North Sea region has well-established infrastructure for Oil production and transportation, ensuring a reliable and consistent supply.
Like all assets supply and demand are the key drivers of Brent Crude 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 Brent 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 Brent Crude 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 Brent Crude 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.
