WTI falls below $63.50 as summer driving season approaches end
- WTI price falls amid weakening US fuel demand as the summer driving season draws to a close.
- Traders watched for India’s response to US pressure to cut Russian Oil imports following the tariff increases.
- Oil prices may regain ground as the Russia-Ukraine attacks on energy infrastructure.
West Texas Intermediate (WTI) Oil price retraces its recent gains from the previous session, trading around $63.40 per barrel during the Asian hours on Thursday. Crude Oil prices eased as investors weighed weakening United States (US) fuel demand with the approach of the end of the summer driving season.
The US Energy Information Administration (EIA) released Crude Oil Stocks Change, indicating stockpiles fell by 2.39 million barrels in the previous week, against the expected 2.0 million barrels decline. The larger-than-expected drawdown pointed to solid demand ahead of the US Labor Day long weekend.
However, IG market analyst Tony Sycamore, cited by Reuters, noted that the holiday typically marks the unofficial end of the summer driving season and the beginning of weaker US demand. Sycamore also added that traders monitored India’s response to US pressure to curb Russian Oil imports after tariff hikes. However, analysts expect India to keep buying in the near term, limiting the global impact. US President Donald Trump on Wednesday doubled tariffs on Indian imports, raising them to as high as 50%.
The downside of the Oil prices could be restrained by intensified Russia-Ukraine attacks on energy infrastructure. Russia launched a massive drone attack on energy and gas transport infrastructure across six Ukrainian regions overnight.
Oil prices may regain their ground amid prevailing dovish sentiment surrounding the Federal Reserve (Fed) policy outlook. It is worth noting that lower borrowing costs would potentially boost economic activity and Oil demand.
New York Fed President John Williams said on Wednesday that interest rates will likely come down at some point, but policymakers will need to review upcoming economic data before deciding for September.
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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