- WTI attracts some sellers near $73.30 in early Asian trading on Tuesday.
- China’s manufacturing activity slowed in August, weighing on WTI prices.
- Halted Libyan exports and increased expectations of Fed rate cuts could limit WTI’s downside.
West Texas Intermediate (WTI), the benchmark for US crude oil, is trading around $73.30 on Tuesday. Slowing manufacturing activity in China in August is putting some selling pressure on the WTI price. However, concerns over Libyan oil supplies could limit its downside.
Sluggish economy and declining oil demand in China are raising fears over the economic health of the world’s largest oil importer, weighing on the price of WTI. Data released by the National Bureau of Statistics showed that China’s manufacturing sector experienced a downturn in August, marking its six-month low. China’s official manufacturing Purchasing Managers’ Index (PMI) fell to 49.1 in August, compared with 49.54 in the previous reading. The reading missed the market consensus of 49.5 in the reported month.
Libya’s oil production was halted across the country on Monday amid ongoing conflicts between various factions since the ouster of Muammar Gaddafi in 2011. Fears of oil supply disruption could provide some support to WTI prices.
Bjarne Schieldrop, chief commodities analyst at SEB, noted, “Current disruptions to Libyan oil production could provide scope for additional OPEC+ supply. But such fluctuations have become fairly normal in recent years, meaning any disruption will likely be short-lived, with news flow indicating that signals for a production restart have already been given.”
Oil traders will take further cues from the release of the US ISM manufacturing PMI for August, due on Tuesday. Later in the week, US non-farm payrolls (NFP) will take centre stage. This event could provide some insight into the size and pace of the US Federal Reserve’s (Fed) interest rate cut this year. Lower interest rates generally support the price of WTI as they reduce the cost of borrowing, which can boost economic activity and oil demand.
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.
