- WTI consolidates its recovery gains recorded over the past two days amid mixed signals.
- Concerns about slowing demand in China and the US are limiting the rise in crude oil prices.
- Broad-based USD weakness inspired by dovish Fed provides support and helps limit losses.
US West Texas Intermediate (WTI) crude oil prices are struggling to capitalize on a two-day recovery move from the lowest level since May 2023 and are range-bound around $68.00 mid-European session on Friday.
Despite concerns over production disruptions caused by Hurricane Francine in the US Gulf of Mexico, a dismal demand outlook is seen as a key factor acting as a headwind for the black liquid. In fact, both the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) lowered their demand growth forecasts earlier this week. This, to a large extent, overshadows concerns over production disruptions caused by Hurricane Francine in the US Gulf of Mexico and limits the upside in crude oil prices.
Meanwhile, the softer-than-expected US Producer Price Index (PPI) report released on Thursday raised bets for a larger interest rate cut by the Federal Reserve (Fed) at its next policy meeting on September 17-18. This, in turn, dragged the 10-year US government bond yield to its lowest level since May 2023. Adding to this, the prevailing risk-on sentiment in global equity markets weighed on the safe-haven US Dollar (USD) and lent support to USD-denominated commodities, including crude oil prices.
Nevertheless, the black liquid remains on track to post modest weekly gains for the first time in the past five, although the aforementioned fundamental backdrop warrants some caution before positioning for any further upward move. Traders might also prefer to wait on the sidelines ahead of next week’s central bank event risk – the outcome of the expected FOMC monetary policy meeting on Wednesday.
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.
