WTI declines to below $61.00 on potential OPEC+ output hike

WTI price drifts lower to near $60.75 in Friday’s early Asian session.
Oil inventories rose by 1.328 million barrels in the week ended May 16, according to the EIA.
The US and Iran will hold fresh nuclear talks on Friday.

Lallalit Srijandorn FXStreet

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $60.75 during the Asian trading hours on Friday. The WTI price edges lower amid concerns that global supply could outpace demand growth.

The Organization of the Petroleum Exporting Countries and its allies (OPEC+) planned to boost oil output to regain market share, which might cap the upside for the WTI price. OPEC+ has raised oil output by more than previously expected since April, with its May output likely to increase by 411,000 barrels per day. OPEC leaders are also contemplating a similar increase in July, and could bring back as much as 2.2 million barrels-per-day (bpd) of supply to the market by November, Reuters reported earlier.

The US Energy Information Administration (EIA) weekly report showed crude oil stockpiles in the US for the week ending May 16 climbed by 1.328 million barrels, compared to a rise of 3.454 million barrels in the previous week. The market consensus estimated that stocks would drop by 1.85 million barrels.

On Tuesday, the US obtained new intelligence suggesting that Israel is making preparations to strike Iranian nuclear facilities, even as US President Donald Trump has been pursuing a diplomatic deal with Tehran. It isn’t clear that Israeli leaders have made a final decision to carry out the strikes, CNN said, citing unnamed officials.

An attack by Israel would hinder any progress in those negotiations and contribute to tension in the Middle East, which provides about one-third of the world's petroleum. Traders will closely watch the next round of Iran-US talks, which will take place on Friday in Rome. Any signs of progress in nuclear talks might weigh on the WTI price.

WTI Oil FAQs

What is WTI Oil?

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.

What factors drive the price of WTI Oil?

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.

How does inventory data impact the price of WTI Oil

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.

How does OPEC influence the price of WTI Oil?

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

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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