WTI slides below $68.00 amid renewed demand fears after dismal Chinese macro data

WTI kicks off the new week on a weaker note in reaction to the dismal Chinese macro data.
Dovish Fed-inspired USD selling bias lends support and helps limit losses for the commodity.
The mixed fundamental backdrop warrants some caution before placing fresh directional bets.

Haresh Menghani FXStreet

West Texas Intermediate (WTI) US crude Oil prices attract some sellers during the Asian session on Monday and currently trade just below the $68.00 round-figure mark, down over 0.60% for the day.

Concerns about a slowing fuel demand in the world's biggest Oil importer resurfaced after a string of poor Chinese data over the weekend, which, in turn, is seen as a key factor weighing on the black liquid. The National Bureau of Statistics data reported on Saturday that China's Retail Sales rose by 2.1% in August from a year ago, down from the 2.7% increase in the previous month and missing expectations. Adding to this, Industrial Production growth slowed from 5.1% in July to 4.5% during the reported month. Furthermore, Fixed Asset Investment rose by 3.4% for the January to August period, slower than the market forecast, and the jobless rate unexpectedly climbed to a six-month high.

This comes on top of a downward revision of demand growth forecasts by the Organization of Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) and prompts fresh selling around Crude Oil prices. That said, the prevalent US Dollar (USD) selling bias, led by expectations for an oversized interest rate cut by the Federal Reserve (Fed), lends support to the commodity and helps limit the downside. Hence, it will be prudent to wait for some follow-through selling before confirming that the recent bounce from the lowest level since May 2023 has run out of steam and positioning for the resumption of the prior downtrend witnessed over the past two months or so.

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 13 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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