WTI Price Forecast: Struggles below $61.00, seems vulnerable to slide further
- WTI drifts lower for the second consecutive day on Friday amid easing geopolitical tensions.
- Concerns that the US government shutdown will dent demand also weigh on the commodity.
- The technical setup favors bears and backs the case for a further near-term depreciating move.
West Texas Intermediate (WTI) US Crude Oil prices extend the previous day's pullback from the vicinity of mid-$62.00s, or the weekly top, and remain depressed for the second straight day on Friday. The commodity sticks to modest intraday losses below the $61.00 mark through the Asian session and remains close to the weekly low touched on Tuesday.
US President Donald Trump said Wednesday that Israel and Hamas had agreed on the first phase of his 20-point Gaza peace plan after talks in Egypt, easing market concerns about the risk of oil supply disruptions from the Middle East. This comes on top of worries that a prolonged US government shutdown could dampen the economy and hurt oil demand in the world’s largest crude consumer, which, in turn, is seen exerting pressure on Crude Oil prices.
From a technical perspective, this week's repeated failures near the 200-period Exponential Moving Average (SMA) on the 4-hour chart favor bearish traders. This, along with negative oscillators on 4-hour and daily charts, suggests that the path of least resistance for Crude Oil prices is to the downside. Hence, some follow-through weakness towards the $60.25-$60.20 region, or the lowest level since May, touched earlier this month, looks like a distinct possibility.
This is closely followed by the $60.00 psychological mark, which, if broken decisively, will be seen as a fresh trigger for bearish traders and pave the way for deeper losses. Crude Oil prices might then accelerate the fall towards testing May swing low, around the $59.40 region, before eventually dropping to the $59.00 round figure.
On the flip side, any meaningful recovery attempt is likely to face stiff resistance near the $61.55-$61.60 region, above which Crude Oil prices could aim to reclaim the $62.00 round figure. Bulls, however, need to wait for a sustained breakout through the 200-period EMA on the 4-hour chart, currently pegged near the $62.35 zone, before positioning for further gains towards the $63.00 mark and the next relevant hurdle near the $63.70-$63.75 area.
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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