WTI finds support near $62 as OPEC+ denies speculation of robust Oil production hike
- WTI gets interim relief near $62.00 as the OPEC+ has denied speculation of almost three times increase in Oil production hike.
- From October, the Oil production will be increased by 137,000 bpd.
- Potential US government shutdown has raised concerns over the Oil demand outlook.
West Texas Intermediate (WTI), futures on NYMEX, finds a temporary support near $62.00 during Wednesday’s Asian session after sliding almost 4.40% in last two trading days. The Oil price gets a provisional relief after the OPEC+ denied speculation regarding the announcement of a multi-fold hike in Oil production in its upcoming meeting on Sunday.
A report from Bloomberg stated on Tuesday that the Oil cartel is aiming to accelerate the rollback of production cuts, started earlier this year, through increasing supply by 500K million barrels per day (bpd) from November, the pace is somewhat four times faster than the current increase of 137,000 starting in October.
The scenario in which the OPEC+ increases its production is unfavourable for the Oil price.
Meanwhile, mounting risks of a United States (US) government shutdown have also weighed on the Oil price, assuming that the potential closure of the federal government could slow down public spending. This could lead to a decline in the overall Oil demand.
Till now, Republicans have failed to persuade Democrats to support the stopgap bill in the House of Senate, citing that their demands cannot be fulfilled.
In Wednesday's session, investors will focus on the US Energy Information Administration (EIA) crude Oil stockpiles data for the week ending September 26, which will be published at 14:30 GMT.
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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