WTI holds steady near $68.50, renewed US dollar demand might cap its upside

Source Fxstreet
  • WTI price flat lines near $68.40 in Friday’s early Asian session. 
  • US crude stocks increased by 2.1 million barrels last week, according to the EIA. 
  • A stronger USD and demand worries might drag the WTI price lower. 

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $68.40 on Friday. The WTI price remains steady as a steep draw in US fuel stocks offset oversupply fears. 

The Energy Information Administration (EIA) weekly report showed crude stocks increased last week. Crude oil stockpiles in the United States for the week ending November 8 rose by 2.089 million barrels, compared to a rise of 2.149 million barrels in the previous week. The market consensus estimated that stocks would increase by 1.85 million barrels. Meanwhile, US gasoline inventories hit a two-year low, falling by 4.4 million barrels last week, compared with analysts' expectations of a 600,000-barrel build. 

A stronger US Dollar (USD) might cap the upside for the USD-denominated oil as it makes oil more expensive for holders of other currencies, which can reduce demand. The US Dollar Index (DXY), a measure of the value of the USD against a basket of six currencies, currently trades near 106.90 after hitting a fresh year-to-date high near 107.05.

"Crude futures are trying to establish equilibrium pricing as a rising U.S. dollar index is creating a further headwind, along with a Trump administration that will now have control of Congress, which is likely to roll back most of the Biden administration's energy policies," Dennis Kissler, senior vice president of trading at BOK Financial, said in a note.

Furthermore, the Organisation of Petroleum Exporting Countries (OPEC) latest downward revision for demand growth earlier this week might weigh on the WTI. OPEC lowered its global oil demand growth predictions for 2024 and 2025, claiming sluggish demand in China, India, and other areas, marking the producer group's fourth straight downward revision. 

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.

 

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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