- WTI attracts buyers for the second straight day and draws support from a combination of factors.
- A drop in US inventories, supply disruption worries and a softer USD act as a tailwind for Oil prices.
- China’s economic woes might cap any further gains ahead of the crucial US CPI report later today.
West Texas Intermediate (WTI) US crude Oil prices build on the overnight recovery from the vicinity of the $80.00 mark, or a two-week low and gain some follow-through positive traction during the Asian session on Thursday. The uptick is supported by a combination of factors and lifts the commodity to a multi-day peak, around the $82.00 round figure in the last hour.
The Organization of the Petroleum Exporting Countries (OPEC) maintained its forecast for relatively strong growth in global Oil demand this year and next. Adding to this, the US Energy Information Administration (EIA) reported that crude inventories fell by 3.4 million barrels to 445.1 million barrels in the week ended July 5, far exceeding analysts' expectations. This is seen underpinning Crude Oil prices amid a modest US Dollar (USD) weakness.
Federal Reserve (Fed) Chair Jerome Powell, during the Congressional testimony, said that the US remained on a path to stable prices and continued low unemployment. The comments reaffirmed market expectations that the Fed will lower borrowing costs in September and cut interest rates again in December. The outlook keeps the USD bulls on the defensive and seems to benefit the USD-denominated commodities, including Crude Oil prices.
Furthermore, concerns about supply disruptions stemming from the ongoing conflicts in the Middle East turn out to be another factor lending some support to the black liquid. Meanwhile, weak inflation data from China – the world's top Oil importer – might cap the upside for Crude Oil prices. Traders might also prefer to wait for the release of the US consumer inflation figures before positioning for the next leg of a directional move.
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 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.
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