WTI retreats from multi-week top, slides to $63.80-$63.75 ahead of US-China trade talks
- WTI drifts lower at the start of a new trading week, though the downside lacks bearish conviction.
- The optimism over US-China trade talks acts as a tailwind for the commodity amid a weaker USD.
- Friday’s breakout through the $63.30 barrier supports prospects for the emergence of dip-buyers.
West Texas Intermediate (WTI) US Crude Oil prices kick off the new week on a softer note and erode a part of Friday's strong gains to levels just above the $64.00 mark, or the highest since April 23. The commodity currently trades around the $63.80 zone, down over 0.40% for the day, though the downside seems cushioned ahead of the key US-China trade talks.
Top US officials, including Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick, are set to meet Chinese Vice Premier He Lifeng in London for negotiations aimed at defusing trade disputes. This fuels hopes about a possible trade deal between the world's two largest economies, which could support economic growth and increase fuel demand. Adding to this, the emergence of a fresh US Dollar (USD) could act as a tailwind for Crude Oil prices.
The initial market reaction to mostly better-than-expected US employment details turns out to be short-lived amid concerns over the worsening US fiscal situation and bets that the Federal Reserve (Fed) might still lower borrowing costs in 2025. This holds back the USD bulls from placing aggressive bets and turns out to be another factor that should offer some support to the USD-denominated commodity, warranting some caution before positioning for deeper losses.
Meanwhile, investors seem to have digested the OPEC+ decision for another big output hike for July on May 31, suggesting that the corrective pullback might be seen as a buying opportunity and is more likely to remain limited. Even from a technical perspective, Friday's sustained breakout through the $63.20-$63.30 supply zone was seen as a key trigger for bullish traders and validates the positive outlook in the absence of any relevant market-moving US macro releases.
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.
