WTI edges higher to $62.65-$62.70 amid geopolitical tensions, oversupply fears cap gains
- WTI edges higher at the start of a new week, though it remains confined in a one-week-old range.
- Rising geopolitical tensions lend support to the commodity, though demand concerns cap gains.
- Oversupply worries could further act as a headwind for Oil prices amid a bearish technical setup.
West Texas Intermediate (WTI) US Crude Oil prices edge higher during the Asian session on Monday, though the uptick lacks bullish conviction. The commodity remains confined in an over one-week-old range, just above a three-month low touched last week, and currently trades around the $62.65-$62.70 region, up 0.50% for the day.
Group of Seven (G7) finance ministers discussed in a call on Friday about imposing further sanctions on Russia and possible tariffs on countries that they consider enabling its war in Ukraine. This comes on the back of Ukraine's recent drone attack that suspended loadings from the largest port in western Russia. Adding to this, the ongoing conflict in the Middle East raised concerns about supply disruptions and supports Crude Oil prices.
Meanwhile, an unexpected rise in US crude inventories pointed to softening demand in the world's largest Oil consumer. Apart from this, the OPEC+ decision to increase production from October continues to fuel concerns about oversupply, which is holding back traders from placing aggressive bullish bets on crude oil prices. Investors also seem reluctant and opt to wait for the FOMC decision on Wednesday before positioning for a firm near-term direction.
Looking at the technical picture, the range-bound price action might still be categorized as a bullish consolidation phase against the backdrop of the recent breakdown below the 100-day Simple Moving Average (SMA). This further backs the case for the emergence of fresh sellers at higher levels and warrants some caution before confirming that Crude Oil prices have formed a near-term bottom.
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.
