- WTI price faces challenges due to easing supply fears amid Middle East tensions.
- US President Joe Biden has suggested that Iran might refrain from attacking Israel if a ceasefire is reached in Gaza.
- The EIA crude oil stocks change rose by 1.357 million barrels last week, ending a six-week decline.
West Texas Intermediate (WTI) crude oil prices extended losses for a third consecutive session, trading around $75.90 during the Asian session on Thursday. Crude oil prices are depreciating following easing supply fears due to geopolitical tensions in the Middle East.
On Wednesday, Reuters reported that U.S. President Joe Biden suggested Iran might refrain from attacking Israel if a ceasefire is reached in Gaza. New ceasefire talks are scheduled to begin on Thursday in Qatar, although Hamas has said it will not take part in the negotiations.
The EIA crude oil stocks change also reported an unexpected increase in U.S. oil inventories, which rose by 1.357 million barrels for the week ending August 9. This marked the end of a six-week decline and defied expectations for a 2.0 million barrel drop. The previous week’s decline was 3.728 million barrels.
However, the fall in oil prices could be limited by expectations of a rate cut by the US Federal Reserve (Fed) in September. Lower interest rates may boost economic activity in the United States (US) and increase demand for oil.
Wednesday’s Consumer Price Index (CPI) data showed a moderate rise in the US annual inflation rate in July, sparking debate over how much the Federal Reserve (Fed) will cut rates in September. While traders are leaning toward a more modest 25 basis point reduction, with a 60% probability, a 50 basis point cut remains a possibility. According to CME FedWatch, there is a 36% chance of the larger cut occurring in September.
However, crude oil prices are expected to remain under pressure due to ongoing concerns about weak global demand, particularly from China. In addition, demand for jet fuel is expected to soften as reduced consumer spending impacts travel budgets, which could further weigh on oil prices in the coming months, according to Reuters.
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.
