WTI extends the decline below $63.50 on lingering oversupply concerns
- WTI price declines to near $63.20 in Tuesday’s early Asian session.
- Excess supply fears weigh on the WTI price, but rising geopolitical risks might cap its downside.
- The American Petroleum Institute (API) weekly crude oil stock report is due later on Tuesday.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $63.20 during the early Asian trading hours on Tuesday. The WTI extends the decline amid lingering oversupply concerns. Oil traders await the release of the American Petroleum Institute (API) weekly crude oil stock report later on Tuesday.
Reuters reported on Monday that Iraq, the Organization of the Petroleum Exporting Countries' (OPEC) second-largest producer, has increased oil exports under an OPEC+ agreement. It also estimates September's exports to range from 3.4 million to 3.45 million barrels per day (bpd). Earlier this month, OPEC+ members agreed to raise production from October by 137,000 bpd. The group has been hiking production since April after years of cuts to support the oil market.
Persistent geopolitical tensions in Russia and the Middle East could boost the WTI price. Russian military jets violated Estonian airspace for 12 minutes on Friday, hovering in neutral airspace above the Baltic Sea. This follows a previous similar violation in Poland. The European Union (EU) is preparing a strong response against Russian intrusions.
The US Federal Reserve (Fed) decided to cut its key interest rate by 25 basis points (bps) at its September meeting last week and signaled that two more reductions are on the way before the end of the year. Fed Governor Stephen Miran, who voted against the quarter-percentage-point reduction in favor of a steeper 50 bps rate cut last week, said on Monday that the central bank should cut interest rates aggressively to reduce risks to the economy's outlook. Lower interest rates generally support oil demand, and the Fed’s guidance suggests it now views risks from rising unemployment as outweighing those from persistent inflation.
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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