WTI Oil stabilizes as oversupply concerns persist, Fed easing offers support
- WTI US Oil stabilizes around $57 amid persistent oversupply worries.
- Growing fears of a global Oil surplus and higher Chinese output weigh on prices.
- Expectations of a Federal Reserve rate cut, however, could help limit losses.
West Texas Intermediate (WTI) US Oil hovers around $57 on Tuesday at the time of writing, stable for the day. Crude Oil prices remain broadly under pressure amid ongoing concerns about a global Oil glut fueled by increased production from the Organization of the Petroleum Exporting Countries and its allies (OPEC+).
According to the International Energy Agency (IEA), global supply could exceed demand by around 4 million barrels per day by 2026, a projection that continues to weigh on market sentiment. At the same time, Commerzbank notes that Chinese refineries processed 62.7 million tons of Crude Oil in September, the highest level in two years. However, China reportedly imported about 570,000 barrels per day more than needed, reinforcing fears of stockpiling and confirming a structural surplus in the market.
Traders are also watching upcoming trade discussions between the United States and China, the world’s two largest Oil consumers. Any deterioration in talks could further dampen global energy demand. Meanwhile, attention turns to the American Petroleum Institute (API) weekly Crude Oil stock report, due later in the day.
On the other hand, expectations of further monetary easing by the US Federal Reserve (Fed) may offer some support to Oil prices. Markets currently assign a 99% chance of a 25-basis-point rate cut at the October policy meeting, according to the CME FedWatch tool. A weaker US Dollar (USD) typically makes dollar-denominated commodities cheaper for foreign buyers, softening the downside pressure on the WTI US Oil 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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