WTI rises above $60.50, upside seems limited due to OPEC+ oversupply concerns
- WTI price rebounded from five-month low of $60.22 recorded on Thursday.
- OPEC+ could lift production by as much as 500,000 barrels per day in November, tripling October’s hike.
- Crude Oil prices fell as US crude Oil inventories rose last week as refining activity and demand weakened.
West Texas Intermediate (WTI) Oil prices halts its four-day losing streak, rebounding from five-month low of $60.22 recorded on Thursday, trading around $60.70 per barrel during the Asian hours on Friday. However, crude Oil prices are on track for their third successive weekly decline amid market expectations of production increase by the Organization of the Petroleum Exporting Countries and allies, including Russia, known as OPEC+.
Reports suggested the OPEC+ may raise output by up to 500,000 barrels per day in November, tripling October’s increase, as Saudi Arabia seeks to reclaim market share. Reuters cited Tony Sycamore, IG analyst, saying "If OPEC+ do go ahead and announce a 500,000 bpd increase this weekend, it's likely a big enough increase to send crude oil lower again, initially to support at $58.00, before a test of this year's lows $55.00 area."
Oil prices also faces challenged as Iraq’s Kurdistan region resumed exports following a 2.5-year halt, adding supply to a market facing surplus risks. Under a new deal with Baghdad, the Kurdistan Regional Government, and international Oil firms will initially transport 180,000–190,000 barrels per day (bpd) to Turkey’s Ceyhan port.
The Energy Information Administration (EIA) noted on Wednesday that United States (US) crude Oil, gasoline and distillate inventories gained last week as refining activity and demand softened. EIA Crude Oil stockpiles reported 1.792 million barrels stockpiles in the previous week, exceeding the market expectations of 1.5 million barrels.
The Oil demand will likely be affected due to concerns that a government shutdown will curtail economic activity in the United States, the world largest oil consumer. The shutdown is expected to extend until next week. Senate Democrats are poised to vote against a GOP-backed short-term funding bill again tomorrow, and the Senate is unlikely to meet this weekend.
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.
