- WTI drops from two-month high of $83.77 as risks to Oil supply due to disruption in facilities at Gulf of Mexico eases.
- The US API reported a big drawdown in Oil inventories for the week ending June 28.
- Investors await the US NFP data for fresh guidance on the Fed’s interest rates.
West Texas Intermediate (WTI), futures on NYMEX, correct to near $82.30 from a two-month high of $83.77 in Wednesday’s European session. The Oil price comes under pressure after a sharp rally as supply concerns over Hurricane Beryl reaching the Gulf of Mexico ease. However, the near-term outlook appears to be firm due to a larger-than-expected drawdown in the United States (US) American Petroleum Institute (API) crude oil inventories for the week ending June 28.
The latest weather forecast from the US National Hurricane Center indicated that Hurricane Beryl would weaken into a tropical storm. Earlier, it was expected that it would disrupt oil production facilities in the Gulf of Mexico.
Meanwhile, the US API reported that oil stockpiles declined by 9.163 million barrels after a small build-up of 0.91 million barrels last week.
In Wednesday’s session, investors will focus on the crude oil inventories data from the US Energy Information Administration (EIA), which will be published at 14:30 GMT. The agency is expected to report a small drawdown in oil inventories by 0.15 million barrels.
On the economic front, investors await the US Nonfarm Payrolls (NFP) data for June, which will be published on Friday. The Employment data will indicate the labor demand and the wage growth, which will influence market expectations for Federal Reserve (Fed) to begin reducing interest rates from the September meeting. Higher expectations for early Fed rate cuts are favorable for the Oil price.
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.
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