WTI Oil struggles to return above $65.00 amid expectations of another supply hike
- Oil prices remain flat around $65 following a $12 sell-off last week..
- OPEC+ countries are widely expected to increase output for the fourth consecutive month in August.
- The easing tensions in the Middle East are posing additional bearish pressure on Crude prices.
WTI Crude Prices are picking up from two-week lows, but they remain about $12 below the previous Monday highs, as the peace in the Middle East and market expectations that OPEC+ countries will agree on another supply hike this week, are keeping upside attempts limited.
Trading action is showing minor gains on Monday, yet with prices constrained within the previous days’ range around $65.00, with the $66.00 level capping bulls for now.
Higher supply and lower demand expectations are weighing on prices
Investors are anticipating a highly likely agreement to increase supply by 411,000 barrels per day for the fourth consecutive time this year, which, in the context of a soft global economic outlook, is likely to lead to an oversupply
In China, the NBS Manufacturing PMI revealed that factory activity contracted for the third consecutive month in June, weighed by weak demand and an uncertain trade context. The US economy contracted in the first quarter of the year, and the Eurozone is struggling. These numbers point to a weak demand for Oil in the coming months
Furthermore, the ongoing peace between Israel and Iran has eased concerns about a potential disruption of global supply if the conflict spilled into a full-blown regional war. This is adding negative pressure on 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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