WTI oscillates in a range below $73.00 mark, downside potential seems limited

WTI consolidates after the overnight pullback from a nearly three-month high.
Concerns about weak demand from China and rising oil supply cap the upside.
Worries about tighter Russian and Iranian supply support to the commodity.

Haresh Menghani FXStreet

West Texas Intermediate (WTI) US Crude Oil prices struggle for a firm intraday direction on Tuesday and oscillate in a narrow trading band, below the $73.00 round figure through the early European session. The commodity, for now, seems to have stalled its retracement slide from the vicinity of mid-$74.00s, or a nearly three-month top touched on Monday amid mixed fundamental cues.

Concerns about weak demand from China – the world's top oil importer – and the rising supply from non-OPEC countries turn out to be key factors acting as a headwind for the black liquid. Furthermore, the volume of global crude exports declined in 2024 for the first time since the COVID-19 pandemic. This, along with expectations that slower rate cuts by the Federal Reserve (Fed) in 2025 could dent fuel demand, contribute to capping Crude Oil prices.

That said, worries about tighter Russian and Iranian supply, amid widening Western sanctions checked losses, should continue to offer support to Crude Oil prices and help limit any meaningful downside. This, in turn, makes it prudent to wait for strong follow-through selling before confirming that the recent positive move witnessed over the past month or so has run out of steam and positioning for any further depreciating move in the commodity.

Traders might also opt to wait on the sidelines ahead of this week's release of the FOMC minutes and the closely-watched US Nonfarm Payrolls (NFP) report on Wednesday and Friday, respectively. This will play a key role in influencing the near-term US Dollar (USD) price dynamics, which, in turn, should provide some meaningful impetus to the USD-denominated commodities and help determine the next leg of a directional move for Crude Oil prices.

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

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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