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WTI extends the rally to near $63.50 amid signs of stronger energy demand

  • WTI price edges higher to around $63.40 in Friday’s early Asian session. 
  • US EIA crude oil inventories tumbled by 6.0 million barrels last week. 
  • Uncertainty of a ceasefire supports oil prices for now.
  • Powell's Jackson Hole speech will take center stage later on Friday. 

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $63.40 during the early Asian trading hours on Friday. The WTI rises to near a two-week high amid signs of strong US demand and uncertainty over efforts to end the war in Ukraine.

Data released by the US Energy Information Administration (EIA) on Wednesday showed crude inventories fell more than expected last week. This weekly report pointed to robust demand in the world’s largest oil consumer and underpinned the WTI price. Crude oil stockpiles in the US for the week ending August 15 fell 6.014 million barrels, compared to a rise of 3.036 million barrels in the previous week. The market consensus estimated that stocks would decrease by 1.3 million barrels.

Additionally, the lack of a near-term resolution between Russia and Ukraine contributes to the WTI’s upside. Traders doubt about negotiations for an end to the Russian-Ukrainian war after Russian Foreign Minister Lavrov said Russia should have a say in security arrangements for Ukraine, and that any unilateral guarantees would be "hopeless." While negotiations might ease supply concerns and cap the upside for the black gold, the prospect of sanctions on Russian crude being lifted could support the WTI price. 

Oil traders will closely monitor the speech from Federal Reserve (Fed) Chair Jerome Powell at the Jackson Hole symposium later on Friday. His remarks could offer some hints about a short-term direction for the Fed regarding rates as well as a longer-term view on policy. Money markets now price a 74% chance of a September rate cut, according to the CME FedWatch tool. Rising rate cut expectations could drag the US Dollar (USD) lower and lift the USD-denominated commodity price. 

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.

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Lallalit Srijandorn

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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