- WTI lacks bullish conviction and is influenced by a combination of factors.
- A modest USD recovery and China’s economic woes act as a headwind.
- The mixed setup warrants some caution before opening directional positions.
US West Texas Intermediate (WTI) crude oil prices are building on the previous day’s solid bounce from the 50-day simple moving average (SMA) support and rallying to a fresh weekly high during the Asian session on Thursday. However, the commodity is struggling to capitalize on the move and is currently trading around the $81.65 region, almost unchanged on the day.
The US Dollar (USD) is attracting some buyers and reversing some of the previous day’s decline to a near four-month low, which in turn is seen as a key factor acting as a headwind for USD-denominated crude oil prices. Adding to this, signs of slowing economic growth in China, the world’s largest oil importer, are helping to cap crude oil prices. However, the fall remains cushioned in the wake of a larger-than-expected weekly drop in US crude oil inventories.
Data released by the Energy Information Administration (EIA) on Wednesday showed a third consecutive weekly decline in US crude oil inventories, with a drop of 4.9 million barrels compared to a 4.4 million drop reported by the American Petroleum Institute. Moreover, the USD’s attempted recovery risks fading quickly amid bets that the Federal Reserve (Fed) will cut rates in September. This, in turn, supports prospects for a significant rise in crude oil prices.
Even from a technical perspective, the failure to find acceptance below the 100-day SMA and the overnight bounce from the key 50-day SMA support suggests that the path of least resistance for the commodity is to the upside. That said, mixed oscillators on the daily chart warrant some caution before confirming that the recent decline from the vicinity of the $84.00 level, or the over two-month high reached on July 5, is over and positioning for further gains.
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.
