WTI trades below $58.00/one-week high; downside potential seems limited
- WTI is seen consolidating its strong gains registered over the past two days.
- Risk of disruptions to Venezuela and Russia supplies supports the commodity.
- Dovish Fed-inspired USD selling could also act as a tailwind for Crude Oil prices.
West Texas Intermediate (WTI) US Crude Oil prices struggle to capitalize on the move up witnessed over the past two days and oscillate in a narrow band during the Asian session on Tuesday. The commodity is currently placed just below the $58.00 mark or over a one-week top, touched the previous day.
Rising tensions between the US and Venezuela, along with reports of Ukrainian drone attacks on two Russian vessels at a Black Sea port, fuel concerns about supply disruption and might continue to act as a tailwind for the black liquid. Adding to this, global demand appears more resilient than feared, as imports into India and China remain strong. This could further support Crude Oil prices and backs the case for the emergence of dip-buying at lower levels.
Meanwhile, the US Dollar (USD) hits a one-week low following US Treasury Secretary Scott Bessent's comments on Monday, which added to longer-term uncertainty around Federal Reserve (Fed) credibility. Bessent floated the idea that the new Fed chair could scrap the dot plot and also flagged possible changes to the inflation framework and communications. This continues to weigh on the USD and benefits USD-denominated commodities, including Oil.
Hence, it will be prudent to wait for strong follow-through selling before confirming that the black liquid's recent recovery move from the lowest level since April, touched last week, has run out of steam and positioning for deeper losses. Moving ahead, the market focus now shifts to US macro releases – the preliminary Q3 GDP report and Durable Goods Orders. The data would provide a fresh insight about the health of the world's largest economy and drive Oil prices.
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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