- WTI starts the new week on a weaker note in reaction to disappointing Chinese macroeconomic data.
- The USD selling bias inspired by the dovish Fed is providing support and helping limit the commodity’s losses.
- The mixed fundamental background warrants some caution before opening new directional positions.
US West Texas Intermediate (WTI) crude oil prices are attracting some sellers during the Asian session on Monday and are currently trading just below the $68.00 round mark, down over 0.60% on the day.
Concerns about a slowdown in fuel demand in the world’s largest oil importer resurfaced after a string of poor Chinese data over the weekend, which, in turn, is seen as a key factor weighing on the black liquid. Data from the National Bureau of Statistics reported on Saturday that China’s retail sales rose 2.1% in August compared with a year earlier, down from the previous month’s 2.7% increase and missing expectations. Also, industrial output growth slowed from 5.1% in July to 4.5% during the reported month. Moreover, fixed-asset investment rose 3.4% in the January-August period, slower than expected by the market, and the unemployment rate unexpectedly rose to a six-month high.
This is in addition to a downward revision of demand growth forecasts by the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) and triggers fresh selling around crude oil prices. That said, the prevailing selling bias of the US Dollar (USD), led by expectations of a large-sized interest rate cut by the Federal Reserve (Fed), lends support to the commodity and helps limit the downside. Therefore, it will be prudent to wait for some further selling before confirming that the recent bounce from the lowest level since May 2023 has lost steam and positioning for the resumption of the downtrend seen over the past two months or so.
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.
