WTI remains below $65.50 despite improved demand outlook
- WTI price dips slightly despite an improved demand outlook, supported by upbeat economic data from major consumers.
- The latest Fed Beige Book indicates that overall business activity saw a slight increase from late May through early June.
- China’s economy slowed in the second quarter, but the deceleration was less severe than expected.
West Texas Intermediate (WTI) Oil price extends its losing streak for the fourth successive day, trading around $65.30 during the European hours on Thursday. However, crude Oil prices gained ground due to upbeat economic data, released recently from the largest Oil consumers.
The latest Fed Beige Book shows that overall business activity increased slightly from late May through early June. The report mentioned that inflation pressures are relatively subdued, but underlying cost pressures are building, and business operators remain cautious. However, the outlook was neutral to slightly pessimistic, as only two districts expected activity to increase, and others foresaw flat or slightly weaker activity.
Meanwhile, data from China showed that economic growth slowed in the second quarter, but not as sharply as feared, partly due to front-loading ahead of US tariffs. This helped ease concerns about the health of the world’s largest crude Oil importer. Additionally, China’s crude Oil throughput rose 8.5% year-over-year in June, suggesting stronger crude demand.
Additionally, Oil prices may gain ground amid easing trade tensions between the United States (US) and China following US President Donald Trump’s lifting the ban on the sale of AI chips to China, along with the announcement of a trade deal with Indonesia. Trump also expressed optimism about potential trade agreements with India and Europe, Reuters cited John Paisie, president of Stratas Advisors.
Oil prices gained ground as the US Energy Information Administration (EIA) reported that crude inventories fell by 3.859 million barrels in the week ending on July 11, surpassing the expected decline of 1.8 million barrels. However, gains were limited by larger-than-expected gasoline and diesel inventories.
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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