WTI recovers to near $65.50 as investors digest OPEC+ large Oil output increase
- The Oil price claws back its initial losses despite OPEC+ announcing bigger-than-expected Oil output increase.
- The US is expected to close trade deals with a number of nations soon.
- US President prepares to send letters to nations that have not signed trade deal, outlining tariff rates.
West Texas Intermediate (WTI), futures on NYMEX, recovers its initial losses and rebounds to near $65.50 during the European trading session on Monday. The Oil price bounces back even as OPEC+ confirms a bigger-than-projected increase in the Oil output from August.
The Oil cartel agreed over the weekend to hike their collective crude production by 548,000 barrels per day (bpd), as they continue to unwind a set of voluntary supply cuts, Bloomberg reported. Economists expected the OPEC+ to raise global Oil production by 411,000 bps, which is announced previously for May, June, and July that was already three times faster than scheduled.
Higher Oil production bodes poorly for the Oil price. Another reason behind the Oil’s recovery move is optimism that the United States (US) will close trade deals with a number of its trading partners soon.
US Treasury Secretary Scott Bessent expressed confidence in an interview with CNN over the weekend that Washington will announce several deals in a couple of days. “There’s a lot of foot dragging on the other side, and so I would expect to see several big announcements over the next couple of days,” Bessent said.
On July 2, Washington stated that it is close to striking a trade agreement with India within 48 hours. However, it has not announced any deal yet.
The closure of fewer trade deals by the US would have a negative impact on the Oil demand, assuming that the imposition of reciprocal tariffs by Washington on higher number of its trading partners will disrupt the global trade.
Additionally, US President Donald Trump has also confirmed that he will start sending letters to nations from Monday, specifying tariffs rates, which have failed to close deal with Washington during the 90-day tariff pause period.
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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