WTI Oil edges up to $61.00 with concerns about oversupply weighing
- Oil Prices pick up to the $61% area but remain more than 6% lower on the week.
- Fears of a sharp output hike after this weekend's OPEC meeting have hammered OIl prices this week.
- In the US, the unexpected increase in EIA Oil inventories shows that demand declined in the last week of August.
The US benchmark West Texas Intermediate Oil is posting moderate gains on Friday, trading at $61.00 at the time of writing, but still on track for its worst week since June. Market fears of an Oil glut have triggered a nearly $5 sell-off over the last five days, sending WTI oil prices to their lowest levels since late May.
The outcome of this weekend’s OPEC+ meeting remains a major concern for traders. A report by Reuters released earlier this week revealed that producer countries are considering increasing their output by up to 500,000 barrels per day in November.
These figures are in contrast with the expectations of lower global demand, amid the soft economic performance of the world’s major economies. These fears have been exacerbated by the US Government shutdown, which is expected to curtail economic growth and weigh on demand for energy by the world’s major Oil consumer, especially if the political standoff draws out long.
Recent data by the US Energy Information Administration revealed on Wednesday that Crude Oil stocks rose by 2.4 million barrels in the week of August 29, as refining activity and gasoline demand declined.
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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