WTI drifts higher to near $62.50 as OPEC+ increases output at steady rate
- WTI price extends the rally to around $62.40 in Tuesday’s early Asian session.
- OPEC+ decided to raise output by 411,000 bpd in July.
- Iran poised to dismiss US nuclear proposal.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $62.40 during the Asian trading hours on Tuesday. The WTI price edges higher after the Organization of the Petroleum Exporting Countries and its allies (OPEC+) decided to increase their production again.
OPEC+ agreed on Saturday to increase production at a steady rate by 411,000 barrels per day (bpd) in July, following an increase in May and June. The group noted in a statement that a “steady global economic outlook and current healthy market fundamentals, as reflected in the low oil inventories” was its reasoning for the July increase.
Meanwhile, the escalating geopolitical tensions in the Middle East raise uncertainty about the flow of oil and gas around the world, lifting the WTI price. Reuters reported late Monday that Iran is poised to reject a US proposal to end a decades-old nuclear dispute after the US draft insisted that Tehran would have to suspend the enrichment of uranium inside Iran.
Oil traders will closely monitor the US employment report for May, which is due later on Friday. This report could offer some hints about the US economy and interest rate path. If the data shows a stronger-than-expected outcome, this could boost the Greenback and cap the upside for the USD-denominated commodity price.
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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