WTI slumps to near $65.00 as OPEC+ hikes August output larger than expected
- The WTI price faces some selling pressure to near $65.00 in Monday’s Asian session.
- OPEC+ members agreed to increase oil production by 548,000 barrels a day in August.
- Concerns about oversupply undermine the WTI price.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $65.00 during the early Asian trading hours on Monday. The WTI price slumps after the Organization of the Petroleum Exporting Countries and allies (OPEC+) agreed to a bigger-than-expected production increase in August.
OPEC+ agreed on Saturday to hike their collective crude production by 548,000 barrels per day (bpd), as they continue to unwind a set of voluntary supply cuts, per Bloomberg. This is faster than the 411,000 bps expected. The group previously announced hikes of 411,000 bpd for May, June, and July, already three times faster than scheduled. Oversized output hikes have raised concerns about oversupply, which could weigh on the WTI price in the near term.
"The increased production clearly represents a more aggressive competition for market share and some tolerance for the resulting decline in price and revenue," said Tim Evans of Evans Energy in a note.
US Treasury Secretary Scott Bessent said Sunday that tariffs imposed in April would go into effect on August 1 for nations that have not negotiated a trade deal with President Donald Trump's administration. His remarks follow Trump's announcement last week that the government will send around a dozen letters to trade partners on Monday informing them of their tariff rates beginning August 1. The fears of the oil demand outlook might contribute to the WTI’s downside.
On the other hand, geopolitical risks in the Middle East, a globally significant region for oil production, might help limit the WTI’s losses. Israel stated late Sunday that the country’s military had attacked Houthi targets at three ports and a power plant in Yemen. Defence Minister Israel Katz confirmed the attack, saying they were carried out due to repeated attacks by the Iranian-backed rebel group on Israel.
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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