- WTI regains positive traction on Monday, halting correction from two-month high.
- Forecasts of peak fuel demand in summer and OPEC+ cuts in Q3 provide support.
- Bets on a Fed rate cut in September are undermining the USD and seem to be further benefiting the commodity.
US West Texas Intermediate (WTI) crude oil prices are attracting some buyers on the opening day of the week and remain well within range of a two-month high reached on Friday. However, the commodity appears confined to a familiar range held for the past two weeks or so and is currently trading around the mid-$81.00 mark, up more than 0.50% on the day.
Lingering geopolitical risks arising from ongoing conflicts in the Middle East and Ukrainian attacks on Russian refineries continue to fuel concerns about supply disruptions from major oil-producing countries. Furthermore, expectations of peak fuel consumption in the summer and OPEC+ cuts in the third quarter could lead to a supply shortfall in the global oil market, which in turn is considered a key factor acting as a tailwind for crude oil prices.
Meanwhile, the US Personal Consumption Expenditure (PCE) Price Index released on Friday confirmed the disinflationary trend and increased bets on an interest rate cut in September by the Federal Reserve (Fed). This moves the US dollar (USD) away from a two-month high hit on Friday and provides additional support to the commodity. That said, China’s economic woes warrant some caution for bulls before positioning for further gains.
Data released over the weekend showed China’s manufacturing activity fell for a second month in June, while services activity slid to a five-month low. This suggests that the world’s second-largest economy remains fragile, which, in turn, could limit the rise in crude oil prices. Additionally, investors may prefer to stay on the sidelines ahead of this week’s major US macroeconomic releases, including the NFP report, for clues on the Fed’s rate cut path.
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.
