- WTI extends rally to near $70.85 in early Wednesday Asian session.
- Rising bets on Fed rate cuts and oil supply disruptions support WTI price.
- Concerns about Chinese demand could limit the price of black gold.
West Texas Intermediate (WTI), the benchmark for US crude oil, is trading around $70.85 on Wednesday. The price of WTI is rising amid supply disruptions in the Gulf of Mexico and hopes that the Federal Reserve (Fed) will cut interest rates on Wednesday.
The Bureau of Safety and Environmental Enforcement reported that about 100,000 barrels per day of U.S. crude oil remained offline in the Gulf as of Tuesday due to Hurricane Francine. In addition, supply disruption in Libya amid a dispute between rival factions over control of the central bank has led to lower oil production and pushed up the price of WTI.
“Supply disruptions are leaving their mark, including the impact of Hurricane Francine on US Gulf of Mexico infrastructure,” said Svetlana Tretyakova, senior analyst at Rystad Energy.
Expectations of a Fed rate cut could revive demand in the top oil-consuming nation. The market is raising expectations for a 50 basis point (bp) cut at the Fed’s September meeting on Wednesday to nearly 67% probability, up from 30% a week ago.
U.S. crude oil inventories rose last week. According to the American Petroleum Institute (API), U.S. crude oil inventories for the week ending Sept. 13 rose by 1.96 million barrels, compared with a decline of 2.79 million barrels in the previous week. Market consensus had been for inventories to decline by just 0.1 million barrels.
On the other hand, IG market strategist Yeap Jun Rong noted that weaker-than-expected recent economic data from China weighed on market sentiment, with the prospects for further subdued growth in the world’s second-largest economy reinforcing concerns about oil demand. Concerns about oil demand in China are likely to limit WTI’s upside for the time being.
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.
