WTI trades with intraday losses below $63.00 amid progress in US-Iran nuclear talks
- WTI attracts fresh sellers at the start of a new week amid easing supply disruption fears.
- A bearish USD could help limit any further losses for the USD-denominated commodity.
- Traders will keep a close eye on this week’s global flash PMIs for a meaningful impetus.
West Texas Intermediate (WTI) US Crude Oil prices kick off the new week on a weaker note and for now, seems to have snapped a two-day winning streak to a near two-week high – levels just above the $64.00 mark touched on Friday. The commodity currently trades around the $62.80 region, down nearly 1.5% for the day, and is pressured by easing supply disruption fears.
The progress toward a US-Iran nuclear deal raised expectations that the return of Iranian oil to global markets would increase supply, which, in turn, is seen undermining the black liquid. In fact, The US and Iran agreed on Saturday to commence expert-level discussions to design a framework for a potential nuclear deal. The expert meetings are scheduled to begin in Oman on Wednesday, with a follow-up session planned for Saturday to assess progress.
Adding to this, Russian President Vladimir Putin's one-day ceasefire in Ukraine on Saturday sparked hopes that tensions could de-escalate. This, in turn, would pave the way for further dialogue and reduced Crude Oil prices' risk premium. However, the prevalent US Dollar (USD) selling bias, which tends to benefit USD-denominated commodities, is holding back traders from placing aggressive bearish bets around the commodity and helping limit deeper losses.
Hence, it will be prudent to wait for strong follow-through selling before confirming that the recent goodish recovery from over a four-year low touched earlier this month has run out of steam. Traders might also opt to wait for this week's release of flash PMIs, which should provide a fresh insight into the global economic health and provide some meaningful impetus to Crude Oil 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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