WTI hovers around $62.50, downside appears due to OECD’s revision of GDP forecasts
- WTI price may struggle as the Organization for Economic Co-operation and Development has revised down forecasts of the global economy.
- The OECD has cut down its global GDP growth forecast to 2.9% from 3.1% previous estimations.
- Oil prices may struggle as dollar-denominated commodities become expensive for holders of other currencies amid an improved US Dollar.
West Texas Intermediate (WTI) Oil price remains steady after registering more than 3.50% gains, trading around $62.50 during the Asian hours on Tuesday. However, Crude Oil prices faced a few challenges, potentially weighed down by the Organization for Economic Co-operation and Development (OECD) cutting down forecasts of the global economy.
The OECD has revised its global GDP growth forecast for the current year to 2.9% from 3.1% previous estimations. The next year global GDP growth forecast has been slightly declined to 2.9% against the previous 3.0%. Meanwhile, the United States (US), the largest Oil consumer, is expected to grow by 1.6% in 2025 versus 2.2% prior and by 1.5% in 2026, slightly lower than the previous estimation of 1.6%.
Moreover, Oil prices may face challenges as dollar-denominated commodities become expensive for holders of other currencies due to a technical upward correction in the Greenback. The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, has rebounded from a six-week low of 98.58 and is trading higher near 98.90 at the time of writing.
However, Oil prices gained ground as ongoing geopolitical tensions boost concerns over a tighter global supply. Iran is prepared to reject a US nuclear deal proposal that would be key to easing sanctions on the Oil producer. Moreover, the second round of Russia-Ukraine peace talks, on Monday, yielded no significant progress in resolving the three-year-long conflict following a surge in hostilities on Sunday.
Reuters reported that refiners worldwide are earning unexpected profits from producing key fuels in recent weeks. This has supported a struggling sector ahead of an anticipated downturn later this year, as plant closures have tightened fuel supply needed to meet peak summer demand.
Oil prices surged after a lower-than-expected supply hike from the group OPEC+, the Organization of the Petroleum Exporting Countries and its allies. The Oil group decided to raise output by 411,000 barrels per day (bpd) in July by the same amount for the third successive month.
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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