WTI eases amid a stronger USD, but remains close to $63.00
- Oil corrects lower following a 3.5% rally over the last two days.
- US Dollar’s recovery from six-week lows is weighing on Crude prices.
- Geopolitical tensions and wildfires in Canada are keeping downside attempts limited.
Oil has been trimming some gains over the last sessions, weighed by a stronger US Dollar, but it remains close to the six-week highs above $63.00 reached on Tuesday.
The US Dollar Index, which measures the value of the Greenback against the six most traded currencies, bounced up about 0.7%, buoyed by strong US job openings data, which has triggered a moderate correction in Crude prices.
A mix of geopolitical factors, however, is keeping downside attempts limited. Russia and Ukraine are far from any significant peace deal, while the US-Iran nuclear talks, which might ease restrictions for one of the world’s largest Oil suppliers, seem to have stalled.
Reports that wildfires in Canada have disrupted about 7% of Canadian Oil supply, or more than 344,000 barrels per day, are contributing to raising concerns about supply.
Apart from that, Eurozone inflation fell below the ECB’s 2% target, according to data released on Tuesday. These figures point to further monetary easing by the ECB, which is likely to bolster economic growth in the region and support demand for Oil.
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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