WTI trades with negative bias just above mid-$60.00s amid mixed fundamental cues
- WTI meets with a fresh supply amid worries that the US-China trade war would dent fuel demand.
- A surprise OPEC+ supply increase further contributes to capping the upside for the black liquid.
- US recession fears and Fed rate cut bets undermine the USD, lending support to the commodity.
West Texas Intermediate (WTI) US Crude Oil prices struggle to capitalize on Friday's modest gains and attract fresh sellers near the $61.60 area at the start of a new week. The commodity currently trades around the $60.70-$60.65 region, down over 0.50% for the day, though it lacks follow-through selling amid mixed fundamental cues.
Investors remain worried that the rapidly escalating trade war between the US and China ֪– the world's two largest economies – would weaken global economic growth. This, in turn, could dent fuel demand, which, along with oversupply concerns, acts as headwind for Crude Oil prices. In fact, eight OPEC+ members unexpectedly decided to pull forward a planned production increase and return 411,000 bpd to the market in May.
The downside for the black liquid, however, remains cushioned on the back of sustained US Dollar (USD) selling. Traders ramped up their bets that the Federal Reserve (Fed) will resume its rate-cutting cycle soon and lower borrowing costs at least three times by the end of this year. The dovish outlook led to the recent USD slump to its lowest level since April 2022, which is seen offering support to USD-denominated commodities.
Meanwhile, US Energy Secretary Chris Wright said on Friday that the US could stop Iran’s oil exports as part of US President Donald Trump’s plan to pressure Tehran over its nuclear program. This further contributes to limiting deeper losses for Crude Oil prices and warrants some caution for bearish traders.
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.