- Oil corrected down after a 3.5% rally in the last two days.
- The recovery of the US dollar from a minimum of six weeks is weighing on oil prices.
- Geopolitical tensions and forest fires in Canada are limiting attempts down.
Petroleum has been cutting some profits in the last sessions, affected by a stronger US dollar, but remains close to the maximum of six weeks above $ 63.00 reached on Tuesday.
The US dollar index, which measures the value of the dollar against the six most negotiated currencies, rebounded around 0.7%, driven by solid employment offers data in the US, which has triggered a moderate correction in crude oil prices.
However, a mixture of geopolitical factors is limiting the downward attempts. Russia and Ukraine are far from any significant peace agreement, while nuclear conversations between the US and Iran, which could relieve restrictions for one of the world’s largest oil suppliers, seem to have stagnated.
Reports indicate that forest fires in Canada have interrupted around 7% of the Canadian oil supply, or more than 344,000 barrels per day, which contributes to increasing concerns about the supply.
Apart from that, the inflation of the Eurozone fell below the objective of 2% of the ECB, according to the data published on Tuesday. These figures point to greater monetary relaxation by the ECB, which will probably drive economic growth in the region and support oil demand.
WTI FAQS oil
WTI oil is a type of crude oil that is sold in international markets. WTI are the acronym of West Texas Intermediate, one of the three main types that include the Brent and Dubai’s crude. The WTI is also known as “light” and “sweet” by its relatively low gravity and sulfur content, respectively. It is considered high quality oil that is easily refined. It is obtained in the United States and is distributed through the Cushing Center, considered “the crossing of the world.” It is a reference for the oil market and the price of WTI is frequently traded in the media.
Like all assets, supply and demand are the main factors that determine the price of WTI oil. As such, global growth can be a driver of the increase in demand and vice versa in the case of weak global growth. Political instability, wars and sanctions can alter the offer and have an impact on prices. OPEC decisions, a group of large oil -producing countries, is another key price factor. The value of the US dollar influences the price of WTI crude oil, since oil is mainly traded in US dollars, so a weaker dollar can make oil more affordable and vice versa.
Weekly reports on oil inventories published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) influence the price of WTI oil. Changes in inventories reflect the fluctuation of supply and demand. If the data show a decrease in inventories, it can indicate an increase in demand, which would raise the price of oil. An increase in inventories may reflect an increase in supply, which makes prices lower. The API report is published every Tuesday and that of the EIA the next day. Their results are usually similar, with a 1% difference between them 75% of the time. EIA data is considered more reliable, since it is a government agency.
The OPEC (Organization of Petroleum Exporting Countries) is a group of 13 nations oil producing that collectively decide the production quotas of member countries in biannual meetings. Their decisions usually influence WTI oil prices. When OPEC decides to reduce fees, it can restrict the supply and raise oil prices. When OPEC increases production, the opposite effect occurs. The OPEC+ is an expanded group that includes another ten non -members of the OPEC, among which Russia stands out.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
