- WTI prices remain subdued near 68.37, the lowest level since December 2023, recorded on Thursday.
- Crude oil prices lost ground due to demand fears in the United States and China.
- The EIA crude oil stocks change fell by 6.873 million barrels, versus the expected decrease of 0.9 million barrels.
West Texas Intermediate (WTI) crude oil is trading around $68.60 during Asian hours on Friday, hovering around $68.37, the lowest level since December 2023, recorded on Thursday. Crude oil prices are depreciating due to demand concerns in both the United States (US) and China.
The US ISM manufacturing PMI indicated that factory activity contracted for a fifth consecutive month, with the pace of decline slightly exceeding expectations. In addition, the world’s largest crude importer, China, showed that manufacturing activity fell to a six-month low in August, with a significant drop in factory prices.
On Thursday, the US Energy Information Administration (EIA) reported a change in crude oil stocks, which decreased by 6.873 million barrels of crude oil inventory for the week ending August 30. This was significantly larger than the market expectation of a decrease of 0.9 million barrels, following the previous reduction of 0.846 million barrels.
The fall in oil prices is expected to be limited by ongoing discussions between the Organization of the Petroleum Exporting Countries and its allies led by Russia (OPEC+), over a delay in planned production increases due to begin in October. According to Reuters, OPEC+ decided to postpone the oil production increase scheduled for October and November and indicated that further delays or reversals of increases could be considered if necessary.
WTI prices could find support on dovish comments made by Federal Reserve (Fed) officials, which increase the chances of an aggressive rate cut by the Fed in September. Lower borrowing costs could stimulate economic activity in the US, potentially boosting oil demand.
Chicago Fed President Austan Goolsbee said on Friday that the long-term trend in the labor market and inflation data warrant the Fed easing interest rate policy soon and then steadily over the next year. FXStreet’s FedTracker, which measures the tone of Fed officials’ speeches on a dovish-to-hawkish scale from 0 to 10 using a custom AI model, rated Goolsbee’s words as neutral with a score of 3.8.
According to the CME’s FedWatch tool, markets fully anticipate at least a 25 basis point (bp) rate cut by the Federal Reserve at its September meeting. The probability of a 50 bp rate cut has risen to 41.0%, up from 30.0% a week ago.
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.
