- WTI price loses ground as US Dollar holds firm on improved yields.
- Crude oil could limit its decline as traders expect the Fed to cut rates in September.
- Fed Governor Christopher Waller said the U.S. central bank is “closer” to a rate cut.
West Texas Intermediate (WTI) crude oil prices are retreating due to a stronger US Dollar (USD). The WTI price is trading around $81.20 per barrel during European hours on Thursday. However, the WTI price gained ground during the Asian session on Thursday, boosted by a larger-than-expected drop in crude oil inventories in the United States, the world’s largest oil consumer.
The U.S. Energy Information Administration (EIA) released the change in U.S. crude oil inventories on Wednesday, reporting a decrease of 4.87 million barrels for the week ending July 12. This drop exceeds the expected decrease of 0.80 million barrels and the previous decrease of 3.443 million barrels.
In addition, rising expectations that the Federal Reserve (Fed) will cut interest rates in September could improve economic conditions in the United States. Lower borrowing costs would help increase economic activities, thereby boosting oil demand.
On Wednesday, Fed Governor Christopher Waller said the U.S. central bank is “closer” to an interest rate cut. Meanwhile, Richmond Fed President Thomas Barkin said the slowdown in inflation had begun to broaden and he would like to see it continue, according to Reuters.
Crude oil prices could face challenges as China’s economy slows in the second quarter, dampening demand in the world’s largest oil importing country. China’s growth drivers remain uneven and trade tensions are escalating, with the US and EU imposing new tariffs on Chinese electric vehicles (EVs).
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.
