WTI declines below $62.00 on weak demand, oversupply concerns
- WTI price edges lower to near $61.80 in Friday’s early Asian session.
- IEA expects oversupply to increase with OPEC output hike.
- Weak US demand and oversupply fears weigh on the WTI price, but geopolitical risks might cap its downside.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $61.80 during the early Asian trading hours on Friday. The WTI declines amid concerns over possible softening of US demand and broad oversupply risks.
US crude oil stocks rose unexpectedly last week, indicating weaker demand and undermining the WTI price. Data released by the Energy Information Administration (EIA) on Wednesday showed that crude oil stockpiles in the US for the week ending September 5 climbed by 3.939 million barrels, compared to a rise of 2.415 million barrels in the previous week. The market consensus estimated that stocks would decline by 1.1 million barrels.
Additionally, the International Energy Agency (IEA) noted in its monthly report that global oil supply will rise more rapidly than expected this year due to planned output increases by the Organization of the Petroleum Exporting Countries and allies (OPEC+).
"Oil prices are falling today in response to bearish IEA headlines, which suggest massive oversupply on the oil market next year," said Carsten Fritsch, an analyst at Commerzbank.
On the other hand, ongoing geopolitical tensions in Europe and the Middle East might help limit the WTI’s losses. Israel on Tuesday launched a strike on Doha, Qatar, targeting the senior leadership of Hamas. Qatar said the attack by Israel violated international law and threatens to widen the conflict in the region, the source of about one-third of global oil supplies.
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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