WTI Crude languishes below $60.00 as oversupply concerns remain alive
- Oil prices trimmed losses on Thursday but remain capped below the $60.00 level for now.
- The approaching deadline of US sanctions on Russia has provided support to WTI Oil.
- Market concerns of an oversupply are weighing on a significant recovery of crude prices.
Oil prices have ticked up from Wednesday’s lows at $58.65, reaching session highs above $59.60 at the time of writing. A new set of US sanctions on Russia takes effect on November 21, which is expected to restrict exports of Russian oil and provide some support for the commodity.
Data released on Wednesday by the US Energy Information Administration (EIA) revealed a larger-than-expected withdrawal of Crude Oil Stocks, which fell by 3.426 million barrels on the week of November 14, beating expectations of a 1.9 million decline.
These figures have offset the impact of a report by the American Petroleum Institute, released the day before, which showed a 4.4 million buildup in Oil stocks, following a 1,3 million increase in the previous week.
Thursday’s recovery, however, is hardly making up for the 2.3% decline seen on Wednesday. Rumours of US-Russia secret negotiations to end the war in Ukraine are watering down the expected impact of the sanctions on Russia. Meanwhile, producer countries are expected to continue hiking output in times of weaker global demand, which is boosting market concerns of an oversupply.
The OPEC supply Outlook, released last week, assessed that world Oil supply will match global demand next year amid the OPEC+ output hikes. This statement highlights a shift from previous estimations of a global Oil deficit in 2026 and triggered sharp declines in Crude prices.
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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