WTI retreats to near $59.50 on oversupply forecasts, sanctions could limit downside
- WTI price dips as oversupply concerns resurface following an ING report forecasting a substantial market surplus through 2026.
- Goldman Sachs warned that a production surge could sustain a surplus of about 2 million barrels per day.
- Oil prices may regain support as US sanctions on Rosneft and Lukoil take effect on November 21.
West Texas Intermediate (WTI) Oil price stalls its three-day rally, slipping to around $59.60 per barrel during Asian hours on Tuesday. Prices softened amid renewed concerns about oversupply after an ING report projected a significant market surplus through 2026. Goldman Sachs also echoed this view on Monday, noting that a production surge could maintain a roughly 2 million-barrel-per-day surplus, likely weighing on Oil prices over the next two years, per Reuters.
The broader outlook for Oil prices remains bearish as both OPEC and non-OPEC producers ramp up output while demand growth slows. OPEC+ recently approved a 137,000 barrels per day increase in its December production target, matching the hikes for October and November, and agreed to pause further increases in the first quarter of 2025.
The prices of the black Gold also came under pressure after Russia’s Novorossiysk port resumed loadings on Sunday, following a two-day shutdown caused by a Ukrainian attack. Still, ongoing Ukrainian strikes on Russian energy infrastructure keep uncertainty elevated, with markets assessing their potential long-term impact on Moscow’s crude exports.
However, the Oil prices may regain support as US sanctions on Rosneft and Lukoil, set to begin on November 21. These measures have already pushed major buyers, including China, India, and Turkey, to halt purchases and seek alternative suppliers.
Additional geopolitical risks continue to offer some support to crude prices, including export disruptions from recent attacks in Sudan, Iran’s seizure of a tanker in Gulf waters last week, and the possibility of US military action in Venezuela.
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
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.
