- WTI attracts some intraday sellers on Monday, though it lacks bearish conviction.
- Trade-related uncertainties and OPEC+ plans to increase outlook exert pressure.
- Geopolitical risk premium remains in play and should limit losses for Oil prices.
West Texas Intermediate (WTI) US Crude Oil prices struggle to capitalize on modest gains registered over the past two days and attract some sellers near the $63.55 area during the Asian session on Monday. The commodity currently trades around the $62.65 region, down 0.50% for the day, though it lacks bearish conviction and remains confined in a familiar range.
US Treasury Secretary Scott Bessent said on Sunday that he did not know if US President Donald Trump had talked to Chinese President Xi Jinping. This keeps a lid on the recent optimism over the de-escalation of trade tensions between the world's two largest economies and adds to worries about a global recession, which could dent fuel demand. Adding to this, OPEC+ plans to increase production and further weigh on Crude Oil prices.
However, the geopolitical risk premium remains in play on the back of the protracted Russia-Ukraine war. In fact, North Korea confirmed on Monday that it had sent troops to fight for Russia in the war with Ukraine. Moreover, US Secretary of State Marco Rubio said the US might abandon its attempts to broker a deal if Russia and Ukraine do not make headway. This is holding back traders from placing bearish bets around Crude Oil prices.
Looking at the broader picture, the black liquid, for now, seems to have stalled its recent goodish recovery move from a multi-year low touched earlier this month and has been oscillating in a range over the past week or so. This marks a consolidation phase, which, along with the aforementioned mixed fundamental backdrop, warrants some caution before positioning for a firm near-term direction in the absence of any relevant macro data.
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.
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