WTI trades with mild negative bias below $60.00; downside potential seems limited
- WTI eases from an over two-week high set on Friday, though the downside remains cushioned.
- Geopolitical uncertainty could limit Russia's supplies and act as a tailwind for Crude Oil prices.
- Fed rate cut bets keep the USD depressed and contribute to limiting losses for the commodity.
West Texas Intermediate (WTI) US Crude Oil prices struggle to capitalize on a three-week-old uptrend and oscillate in a narrow band during the Asian session on Monday. The commodity, however, remains close to a two-week high, touched on Friday, and currently trades just below the $60.00 psychological mark, down less than 0.10% for the day.
Reuters, citing sources familiar with the matter, reported on Friday that the Group of Seven (G7) countries and the European Union (EU) are in talks to replace a price cap on Russian oil exports with a full maritime services ban. This may curb supplies from the world’s second-largest producer – Russia. Apart from this, a slow progress in the Russia-Ukraine peace talks continues to act as a tailwind for Crude Oil prices.
Meanwhile, the growing acceptance that the US Federal Reserve (Fed) will cut interest rates again at the end of a two-day policy meeting later this week, on Wednesday, keeps the US Dollar (USD) depressed near its lowest level since late October. This, in turn, could further act as a tailwind for USD-denominated commodities, including Crude Oil prices, and limit deeper losses, warranting some caution for bearish traders.
The upside for the black liquid, however, seems capped on the back of renewed concerns about global supply surplus. In fact, the Organisation of the Petroleum Exporting Countries (OPEC), in its latest monthly report, said that global oil supply is likely to exceed demand in 2026 amid higher expected output from OPEC+ members, including Russia. Adding to this, signs of rising US crude inventories might cap gains for Oil prices.
From a technical perspective, Friday's breakout and close above the 50-day Simple Moving Average (SMA) could be seen as a key trigger for bullish traders. This, in turn, suggests that the path of least resistance for the commodity is to the upside and that any meaningful corrective slide could be seen as a buying opportunity.
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
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
