- The high fire in the Middle East stopped concerns about the supply and caused a 16% drop in oil prices.
- With geopolitical fears outside the way, the prospects for a weaker demand are weighing in the recovery of crude oil prices.
- A Powell of the Fed in hard line posture in Tuesday’s testimony before Congress added negative pressure on prices.
Crude oil is consolidating losses on Wednesday, after having depreciated more than $ 10 from Monday. The high fire in the Middle East has relieved concerns about an interruption of the oil supply, which maintains the price of the barrel for the American reference WTI below the level of 65.00 $.
The truce between Israel and Iran seems fragile, but remains for the second day. Iran’s oil supply capacity does not seem to have been affected by Israel’s bombings, and the threat of a block of the narrow ormuz key has been far away for now. All these circumstances have contributed to bringing prices back to levels prior to war.
Market concerns about the weak oil demand are still alive
Apart from that, concerns about demand are still alive. The US economy continues to show signs of deceleration. Consumer confidence deteriorated in June, according to the data published on Tuesday, which confirmed the gloomy panorama anticipated by previous macroeconomic publications.
The Eurozone is stagnant, and China’s recovery seems elusive. In this context, the plans of Opec+ countries to continue increasing the offer could lead to excess oil.
Also on Tuesday, the president of the Fed, Jerome Powell, refused to point out any short -term rate cuts, since he said that upward risks on inflation derived from Trump’s tariffs remain high. The restrictive policy of the Fed is weighing on economic activity and oil demand, adding negative pressure on prices.
WTI FAQS oil
WTI oil is a type of crude oil that is sold in international markets. WTI are the acronym of West Texas Intermediate, one of the three main types that include the Brent and Dubai’s crude. The WTI is also known as “light” and “sweet” by its relatively low gravity and sulfur content, respectively. It is considered high quality oil that is easily refined. It is obtained in the United States and is distributed through the Cushing Center, considered “the crossing of the world.” It is a reference for the oil market and the price of WTI is frequently traded in the media.
Like all assets, supply and demand are the main factors that determine the price of WTI oil. As such, global growth can be a driver of the increase in demand and vice versa in the case of weak global growth. Political instability, wars and sanctions can alter the offer and have an impact on prices. OPEC decisions, a group of large oil -producing countries, is another key price factor. The value of the US dollar influences the price of WTI crude oil, since oil is mainly traded in US dollars, so a weaker dollar can make oil more affordable and vice versa.
Weekly reports on oil inventories published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) influence the price of WTI oil. Changes in inventories reflect the fluctuation of supply and demand. If the data show a decrease in inventories, it can indicate an increase in demand, which would raise the price of oil. An increase in inventories may reflect an increase in supply, which makes prices lower. The API report is published every Tuesday and that of the EIA the next day. Their results are usually similar, with a 1% difference between them 75% of the time. EIA data is considered more reliable, since it is a government agency.
The OPEC (Organization of Petroleum Exporting Countries) is a group of 13 nations oil producing that collectively decide the production quotas of member countries in biannual meetings. Their decisions usually influence WTI oil prices. When OPEC decides to reduce fees, it can restrict the supply and raise oil prices. When OPEC increases production, the opposite effect occurs. The OPEC+ is an expanded group that includes another ten non -members of the OPEC, among which Russia stands out.
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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.
