- WTI attracts buyers for the second consecutive day, supported by a combination of factors.
- A drop in US inventories, concerns about supply disruptions and a weaker USD act as tailwinds for oil prices.
- China’s economic concerns could limit further gains ahead of the crucial US CPI report later today.
US West Texas Intermediate (WTI) crude oil prices are building on the overnight recovery from the vicinity of the $80.00 level, or a two-week low, and gaining some positive traction during the Asian session on Thursday. The rally is supported by a combination of factors and lifts the commodity to a multi-day peak, around the round figure of $82.00 in the last hour.
The Organization of the Petroleum Exporting Countries (OPEC) maintained its forecast for relatively strong growth in global oil demand this year and next. Adding to this, the US Energy Information Administration (EIA) reported that crude oil inventories fell by 3.4 million barrels to 445.1 million barrels in the week ending July 5, far exceeding analysts’ expectations. This is seen supporting crude oil prices amid modest US Dollar (USD) weakness.
Federal Reserve (Fed) Chairman Jerome Powell, during testimony before Congress, said the US remained on a path toward stable prices and continued low unemployment. The comments reaffirmed market expectations that the Fed will reduce borrowing costs in September and cut interest rates again in December. The outlook keeps USD bulls on the defensive and appears to benefit USD-denominated commodities, including crude oil prices.
Moreover, concerns over supply disruptions stemming from ongoing conflicts in the Middle East are proving to be another factor lending some support to the black liquid. Meanwhile, weak inflation data from China, the world’s largest oil importer, could limit the upside in crude oil prices. Traders might also prefer to wait for the release of US consumer inflation figures before positioning for the next leg of a directional move.
WTI Oil FAQs
WTI crude oil is a type of crude oil sold on international markets. WTI stands for West Texas Intermediate, one of three main types that include Brent and Dubai crude. WTI is also known as “light” and “sweet” for 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 through the Cushing hub, considered “the pipeline crossroads of the world.” It is a benchmark for the oil market and the price of WTI is frequently quoted in the media.
Like all assets, supply and demand are the main factors determining the price of WTI crude oil. As such, global growth can be a driver of increased demand and vice versa in the case of weak global growth. Political instability, wars and sanctions can disrupt supply and impact prices. Decisions by OPEC, a group of large oil producing countries, are another key driver of price. The value of the US Dollar influences the price of WTI crude oil, as oil is primarily traded in US Dollars, so a weaker 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) influence the price of WTI oil. Changes in inventories reflect fluctuations in supply and demand. If the data show a decrease in inventories, it may indicate an increase in demand, which would push up the price of oil. An increase in inventories may reflect an increase in supply, which pushes down prices. The API report is published every Tuesday, and the EIA report the following day. Their results are usually similar, with a difference of 1% between them 75% of the time. The EIA data is considered more reliable because it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 13 oil-producing nations that collectively decide on member countries’ production quotas at biennial meetings. Their decisions often influence WTI oil prices. When OPEC decides to reduce quotas, it can restrict supply and drive up oil prices. When OPEC increases production, the opposite effect occurs. OPEC+ is an expanded group that includes ten other non-OPEC countries, most notably Russia.
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.
