WTI holds below $60.00, Fed rate cut bets cushion losses
- WTI price edges lower to $59.45 in Friday’s early Asian session.
- EIA reported a smaller-than-expected US crude oil inventory build.
- Rising Fed rate cut bets and geopolitical risks might cap the downside for the WTI price.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $59.45 during the Asian trading hours on Friday. The WTI declines amid an increase in US crude oil stockpiles, signaling excess supply.
Data released by the Energy Information Administration (EIA) on Wednesday showed that crude oil stockpiles in the US for the week ending November 23 increased by 574,000 barrels compared to a rise of 2.774 million barrels in the previous week. This figure came in above the market consensus of -1.9 million barrels.
An imminent quarter-point rate cut by the US Federal Reserve (Fed) could strengthen the outlook for higher energy demand in 2025. Traders are currently pricing in an 89% probability of a quarter-point rate cut next week, according to the CME FedWatch tool, with an expected 89 basis points (bps) of easing by the end of next year. Lower interest rates generally drag the US Dollar (USD) lower and boost the WTI price, as it makes USD-denominated commodities cheaper for foreign buyers.
Furthermore, attacks on Russian oil infrastructure by Ukraine raised the prospect of supply constraints, which could also underpin the WTI price. Ukraine targeted the Druzhba pipeline in Russia’s central Tambov region on Wednesday, according to a Ukrainian military intelligence source.
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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