WTI declines to near $76.00, driven by easing supply concerns, rising US Oil inventories
- WTI price faces challenges due to easing supply fears over Middle East tensions.
- US President Joe Biden suggested that Iran might refrain from attacking Israel if a cease-fire in Gaza is achieved.
- EIA Crude Oil Stocks Change increased by 1.357 million barrels for the previous week, ending a six-week decline.
West Texas Intermediate (WTI) Oil price extends losses for the third successive session, trading around $75.90 during the Asian session on Thursday. Crude Oil prices depreciate following the easing supply fears over geopolitical tensions in the Middle East.
On Wednesday, Reuters reported that US President Joe Biden suggested Iran might refrain from attacking Israel if a cease-fire is achieved in Gaza. New cease-fire talks are scheduled to begin on Thursday in Qatar, though Hamas has stated it will not participate in the negotiations.
The EIA Crude Oil Stocks Change also reported an unexpected increase in US Oil inventories, which rose by 1.357 million barrels for the week ending August 9. This marked the end of a six-week decline and defied expectations of a 2.0 million-barrel drop. The previous week's decline was 3.728 million barrels.
However, the downside of the Oil prices could be restrained as expectations of a rate cut by the US Federal Reserve (Fed) in September. Lower interest rates may boost economic activity in the United States (US) and fuel Oil demand.
Wednesday's Consumer Price Index (CPI) data showed a moderate increase in July's annual US inflation rate sparking debate on how much the Federal Reserve (Fed) will cut rates in September. While traders are leaning toward a more modest 25 basis point reduction, with a 60% probability, a 50 basis point cut remains a possibility. According to CME FedWatch, there is a 36% chance of the larger cut occurring in September.
However, crude Oil prices are expected to remain under pressure due to ongoing concerns about sluggish global demand, particularly from China. Additionally, jet fuel demand is likely to soften as reduced consumer spending impacts travel budgets, which could further weigh on Oil prices in the coming months, per Reuters.
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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