WTI sticks to gain around mid-$81.00s, below two-month high touched on Friday

WTI regains positive traction on Monday and stalls its corrective slide from a two-month top.
Forecasts of a peak summer fuel demand and OPEC+ cuts in the third quarter lend support.
September Fed rate cut bets undermine the USD and further seem to benefit the commodity.

Haresh Menghani FXStreet

West Texas Intermediate (WTI) US crude Oil prices attract some dip-buyers on the first day of a new week and remain well within the striking distance of a two-month peak touched on Friday. The commodity, however, seems confined in a familiar range held over the past two weeks or so and currently trades around mid-$81.00s, up over 0.50% for the day.

Persistent geopolitical risks stemming from the ongoing conflicts in the Middle East and Ukrainian attacks on Russian refineries continue to fuel concerns about supply disruptions from the key Oil producing countries. Furthermore, expectations of a peak summer fuel consumption and OPEC+ cuts in the third quarter could lead to a global oil market supply deficit, which, in turn, is seen as a key factor acting as a tailwind for Crude Oil prices.

Meanwhile, the US Personal Consumption Expenditures (PCE) Price Index released on Friday confirmed the disinflationary trend and lifted bets for a September interest rate cut by the Federal Reserve (Fed). This drags the US Dollar (USD) away from a two-month peak touched on Friday and lends additional support to the commodity. That said, China's economic woes warrant some caution for bulls and before positioning for any further gains.

Data released over the weekend showed that China's manufacturing activity fell for a second month in June while services activity slipped to a five-month low. This suggested that the world's second-largest economy remains fragile, which, in turn, could cap the upside for Crude Oil prices. Traders might also prefer to wait on the sidelines ahead of this week's important US macro releases, including the NFP report, for cues about the Fed's rate-cut path.

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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