WTI holds gains around $61.50 due to smaller output hike by OPEC+
- WTI gains ground as OPEC+ decided to increase output by 137,000 barrels per day in November, falling short-than-expected.
- Oil prices receive support from the rising odds of the US Federal Reserve delivering rate cuts.
- Fed Governor Miran reaffirmed his view that the central bank has considerable room to lower rates toward a neutral level.
West Texas Intermediate (WTI) Oil price is extending its gains, trading around $61.60 per barrel during the early European hours on Monday. Crude Oil prices received support after the Organization of the Petroleum Exporting Countries and its allies, including Russia, known as OPEC+, announced a smaller-than-expected production hike, easing concerns over rising supply.
The group decided on Sunday to increase output by 137,000 barrels per day (bpd) in November, matching October’s modest rise and falling short of earlier expectations. Ahead of the meeting, Russia might have advocated for an increase of 137,000 bpd to avoid pressuring prices, though Saudi Arabia preferred double, triple, or even quadruple that figure to accelerate its market share recovery, per Reuters.
OPEC+ noted that the recent decision is a response to a steady global economic outlook and current healthy market fundamentals, noting that output adjustments may be paused or reversed if conditions change. OPEC+ had already reversed a 2.2 million bpd production cut, one year ahead of schedule, and was in the process of unwinding an additional 1.65 million bpd reduction by the end of September.
Oil prices also draw support from the increased likelihood of the US Federal Reserve (Fed) delivering rate cuts in the upcoming meetings. Lower borrowing costs would help in increasing economic activities in the United States (US) and Oil demand.
The CME FedWatch Tool suggests that markets are now pricing in a 95% chance of a Fed rate cut in October and an 84% possibility of another reduction in December. Fed Governor Stephen Miran doubled down on his belief that the Fed has a lot more room to cut its way to neutral interest rates. Miran also said that “I hope we'll have the needed data by the October FOMC meeting.” “Policy has become much more restrictive this year.”
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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