WTI Price Forecast: Trades with modest gains below $60.00; not out of the woods yet

WTI attracts some buyers during the Asian session, though it lacks bullish conviction.
The technical setup backs the case for the emergence of fresh sellers at higher levels.
A breakout through the trend-channel hurdle is needed to negate the negative bias.

Haresh Menghani FXStreet

West Texas Intermediate (WTI) US Crude Oil prices edge higher during the Asian session on Friday and for now, seem to have snapped a four-day losing streak to an over two-week low, touched the previous day. The commodity, however, remains below the $60.00 psychological mark, warranting some caution for bullish traders and before positioning for any meaningful positive move.

From a technical perspective, the black liquid has been trending lower along a downward-sloping channel since late October. Moreover, overnight breakdown below the 100-period Simple Moving Average (SMA) on the 4-hour chart suggests that the path of least resistance for Crude Oil prices remains to the downside. Hence, any subsequent move up is more likely to attract fresh sellers near the $60.30 region.

A sustained strength beyond the latter could lift the commodity further, though it is more likely to face stiff resistance and remain capped near the trend-channel hurdle, currently pegged near the $60.65 region. Some follow-through buying, however, might negate the near-term negative outlook and trigger a short-covering rally, which should allow Crude Oil prices to aim towards reclaiming the $61.00 round figure.

On the flip side, the $59.00 mark could offer some support ahead of the overnight trough, around the $58.75 region, below which Crude Oil prices could challenge the lower end of the descending channel, currently around the $58.35 zone. A convincing break below the trend-channel could make the commodity vulnerable to slide further below the $58.00 mark, towards the next relevant support near the $57.40-$57.35 region.

WTI 4-hour chart

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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