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WTI attracts some buyers and snaps a three-day losing streak to a multi-week trough.
Rising Middle East tensions turn out to be a key factor underpinning the commodity.
Concerns about slowing demand in China and the global supply glut could cap gains.
West Texas Intermediate (WTI) US Crude Oil prices show some resilience below the $67.00 round-figure mark and attract some buyers at the start of a new week. The commodity currently trades just below mid-$67.00s, up 0.60% for the day, and for now, seems to have snapped a three-day losing streak to a three-week low touched on Friday.
The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, last week decided to postpone planned supply increases by three months until April and extend the full unwinding of cuts by a year until the end of 2026. Moreover, the worsening Russia-Ukraine war, along with the overthrow of Syrian President Bashar al-Assad by rebels, keeps the geopolitical risk premium in play and acts as a tailwind for Crude Oil prices.
Furthermore, signs of US economic resilience, along with hopes that US President-elect Donald Trump's expansionary policies will boost fuel demand, offer some support to the black liquid. Meanwhile, Saudi's price cuts to Asian buyers highlighted concerns about a slowdown in demand from China – the world's top oil importer. Adding to this, worries about a potential supply glut might cap any meaningful upside for Crude Oil prices.
Furthermore, a closely followed report by Baker Hughes on Friday showed that the number of oil and gas rigs deployed in the US hit the highest since mid-September last week. This pointed to rising output from the world's biggest crude producer and might further contribute to keeping a lid on Crude Oil prices. Hence, it will be prudent to wait for strong follow-through buying before positioning for any further appreciating move for the commodity.
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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* The content presented above, whether from a third party or not, is considered as general advice only. This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.
