WTI Oil dips further, approaching $65.00 on renewed fears about demand
- Oil prices drop for the third consecutive day and approach the $65.00 level.
- The uncertain global trade outlook and the prospects of higher tariffs keep fears of a decline in demand alive.
- Strong US CPI data dampened hopes of Fed cuts, increasing pressure on prices.
Crude Oil Prices are trading lower for the third consecutive day on Wednesday as trade uncertainty, an unexpected increase in US stockpiles and the dwindling hopes of Fed cuts, following Tuesday’s US CPI data, have revived concerns about demand.
The price of the US benchmark West Texas Intermediate (WTI) is trading at $65.30 during Wednesday’s European trading session, after having been rejected at $66.00 earlier today, and is on track for a 3.5% decline so far this week.
Trade uncertainty, restrictive Fed policy weighing on Crude prices
Uncertainty around global trade remains high, amid the lack of progress on UD deals with key partners, as the August 1 deadline approaches. A deal with Indonesia earlier today leaves the country with 15% tariffs on all its products, and Trump announced a new round of tariff letters to smaller countries, informing them about tariffs “a little above 10”.
In the US, consumer prices accelerated in June, pointing to the inflationary impact of tariffs and complicating the Federal Reserve’s monetary policy decisions. The market is assuming that interest rates will likely remain high for a longer time, weighing on economic growth and, therefore, on demand for Oil.
Beyond that, a report by the American Petroleum Institute revealed that crude Oil inventories rose by 19.10 million barrels in the week of July 11, against market expectations of a 2 million barrel drawdown and following another 7.1 million increase on the previous week.
This is the largest weekly increase in stocks in more than 10 years, which increases fears of an Oil glut, and adds 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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