WTI falls to near $66.00 due to concerns over weakening Oil demand
- WTI price drops as concerns over weakening oil demand rise amid decreasing odds of Fed rate cuts.
- The US NFP showed 147,000 new jobs added, while the Unemployment Rate declined to 4.1% in June.
- The US Treasury and State Departments announced sanctions targeting a network involved in smuggling Iranian Oil.
West Texas Intermediate (WTI) Oil price extends its losses for the second successive session, trading around $66.10 per barrel during the Asian hours on Friday. Crude Oil prices depreciate due to potential easing of Oil demand, driven by the solid job market, bolstering the case for the US Federal Reserve (Fed) keeping interest rates on hold. This is important to note that higher borrowing cost dampens economic activities in the United States (US), the world’s largest Oil consumer, and weaken crude prices.
The US Nonfarm Payrolls (NFP) showed that the US labor force grew by 147,000 jobs, surpassing the anticipated 110,000 in June. Additionally, the Unemployment Rate declined to 4.1% from 4.2%. Meanwhile, weekly Jobless Claims fell to 233,000, down from 237,000.
Moreover, investors are also awaiting clarity on US President Donald Trump's plans for tariffs on various countries. Trump said late Thursday that he “will begin sending letters on trade tariffs starting Friday.” He told reporters that he would send letters to 10 countries at a time, laying out tariff rates of 20% to 30%, per Reuters.
Additionally, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, are prepared to announce an increase of 411,000 barrels per day in production for August at their meeting this weekend. The total output increase in 2025 will raise the gain to 1.78 million barrels per day, which is equivalent to more than 1.5% of global oil demand.
The downside of the Oil prices could be restrained as on Thursday, the US Treasury and State departments announced separate sanctions against a network that smuggles Iranian oil disguised as Iraqi Oil and a Hezbollah-controlled financial institution, according to Reuters.
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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