WTI drifts lower to near $65.50 amid fears of OPEC triggering oversupply
- WTI price edges lower to near $65.50 in Thursday’s early Asian session.
- Oil loses ground after a report that OPEC+ will consider a fresh round of production increases on Sunday.
- API inventory showed an unexpected build in crude stocks last week.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $65.50 during the early Asian trading hours on Wednesday. The WTI declines on concerns over a global oil supply glut after Reuters reports that the Organization of the Petroleum Exporting Countries and its allies (OPEC+) is considering an increase in its crude production levels.
OPEC+ countries are scheduled to meet on Sunday to decide on October output. It is widely reported that the group will consider further raising oil production at this meeting. OPEC+ had already agreed to raise output targets by about 2.2 million barrels per day (bpd) from April to September, in addition to a 300,000 bpd quota increase for the United Arab Emirates. Concerns about higher OPEC production are negative for the WTI price.
Data released by the American Petroleum Institute (API) on Wednesday showed that crude oil stockpiles in the US for the week ending August 29 rose by 622,000 barrels, compared to a decline of 974,000 barrels in the previous week. The market consensus estimated that stocks would fall by 3.4 million barrels.
Nonetheless, the ongoing war between Russia and Ukraine could lead to additional sanctions on Russian energy exports. This, in turn, could reduce global oil supplies and support the WTI price. US Treasury Secretary Bessent said on Tuesday that the US "will be examining sanctions on Russia very closely this week" due to the ongoing war in Ukraine. Meanwhile, US President Donald Trump threatened to impose additional sanctions on Russia if no progress is made in peace talks with Ukraine.
Oil traders will keep an eye on the release of the Energy Information Administration's (EIA) weekly crude oil stock report, which is scheduled for release later on Wednesday. The attention will shift to the US Nonfarm Payrolls (NFP) report for August later on Friday. In case of the stronger-than-expected outcome, this could lift the US Dollar (USD) and weigh on the USD-denominated commodity price.
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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