WTI moves below $81.50 as IEA forecasts a slowdown in Oil demand growth
- WTI price depreciates as the IEA expects global Oil demand growth to slow in 2024 and 2025.
- IEA stated that China’s share of global demand will decline to around 40% from last year’s 70%.
- US Crude Oil Stocks declined by 3.443 million barrels, against the expected decline of 3.0 million barrels.
West Texas Intermediate (WTI) Oil price retraces gains from the previous session, trading around $81.40 per barrel during European hours on Thursday. Crude Oil prices are under pressure as the International Energy Agency (IEA) reported that global Oil demand growth is expected to slow to just under a million barrels per day (bpd) in 2024 and 2025, according to Reuters.
In its monthly Oil report, the IEA noted that global demand in the second quarter increased by 710,000 bpd year-on-year, marking the smallest quarterly rise in over a year. This slowdown is attributed to reduced Chinese consumption amid economic challenges. The IEA stated, "China’s pre-eminence is fading. Last year the country accounted for 70% of global demand gains; this will decline to around 40% in 2024 and 2025."
Traders await the upcoming US Consumer Price Index (CPI) data for June, set to be released on Thursday, for more insights into the Federal Reserve's (Fed) monetary policy direction. Higher interest rates affect the US economy, the largest Oil consumer in the world, which in turn impacts crude Oil demand.
Oil prices found some support due to a larger-than-expected drawdown in US crude inventories. The Energy Information Administration (EIA) reported a decline of 3.443 million barrels in US Crude Oil Stocks for the week ended July 5, surpassing the expected decrease of 3.0 million barrels.
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 13 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
Akhtar Faruqui
FXStreet
Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.
