WTI Oil remains capped below $62.00 on oversupply fears, US shutdown
- WTI Oil remains near four-month lows, below $62.00.
- Investors are wary that OPEC+ will accelerate supply hikes in November.
- The G7 has launched a joint statement pledging to impose further sanctions on Russian Oil.
The US Benchmark West Texas Intermediate is trading at $61.80 per barrel at the time of writing. A mild recovery attempt was capped at $62.30 on Wednesday, and Oil is trading moderately lower on Thursday, drawing closer to the four-month lows of $61.30.
Investors’ concerns about the negative consequences of the US government shutdown and expectations that OPEC+ will hike supply again in November have offset the impact of potential sanctions on Russia.
News reports from Reuters released earlier this week revealed that the OPEC+ might be considering accelerating supply in November, beyond the 137,000 barrels per day hike approved in October.
This news came together with the closure of the US federal government, raising concerns of an oversupply. It is still unknown how long it will take, but the shutdown will weigh on demand for oil from the world’s largest economy, at a moment when other major economies are showing clear signs of weakness.
Increasing fears about an oil glut have offset expectations os further sanctions on Russia following a joint statement by G7 finance ministers pledging to increase pressure on those countries or entities buying Russian Oil or facilitating circumvention.
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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