WTI holds losses near $60.50 despite OPEC+ output pause
- WTI declines, possibly pressured by diminishing prospects of further Fed rate cuts.
- Crude oil prices may find support as OPEC+ decides to pause output increases early next year.
- Some analysts cautioned that supply risks remain, citing tighter US sanctions on Russian Oil majors Rosneft and Lukoil.
West Texas Intermediate (WTI) Oil price remains subdued for the second successive day, trading around $60.70 per barrel during the Asian hours on Tuesday. The prices of Oil lose ground, which could be attributed to the market caution surrounding the US Federal Reserve (Fed) policy outlook for the December meeting.
Fed Chair Jerome Powell said last week during the post-meeting press conference that another rate cut in December is far from certain. Powell also cautioned that policymakers may need to take a wait-and-see approach until official data reporting resumes. Fed funds futures traders are now pricing in a 65% chance of a cut in December, down from 94% a week ago, according to the CME FedWatch Tool.
The downside of the Crude Oil prices could be restrained as OPEC+, the Organization of the Petroleum Exporting Countries and its allies, including Russia, decided to pause output increases early next year. Reuters, citing a note from Bank of America (BofA), reported that traders are likely to view OPEC+’s pause as a positive move. The note stated, “It certainly suggests that OPEC+ recognizes the oversupply and likely does not want to push oil prices significantly lower (i.e., below $50).”
The Oil group agreed to a modest production increase in December but plans to halt further additions from January to March due to seasonal demand fluctuations. This decision comes amid growing expectations that the Oil market could face a surplus in 2026, driven by continued supply growth from both OPEC and non-OPEC producers.
However, some analysts warned that supply risks persist, pointing to tighter US sanctions on Russian Oil majors Rosneft and Lukoil, as well as ongoing attacks on Russia’s energy infrastructure. The latest Ukrainian drone strike reportedly ignited a tanker and disabled several loading facilities at the Black Sea port of Tuapse, which houses a Rosneft refinery.
According to a note from JP Morgan cited by Reuters, “Our oil strategists maintain their view that while the risk of disruption has increased, US measures, along with complementary actions by the UK and EU, will not prevent Russian Oil producers from operating.”
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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