WTI falls for third consecutive day amid concerns about slowing Chinese economy.
A modest strength of the US dollar helps to divert money flows away from commodities.
Concerns about supply disruption from the Middle East could continue to act as a tailwind.
US West Texas Intermediate (WTI) crude oil prices are trading with a negative bias for the third consecutive day on Tuesday, although they are not following a sustained sell-off and are holding above the overnight low. The commodity is currently trading around the $80.70 region, down nearly 0.40% on the day and is pressured by a combination of factors.
Official data released on Monday showed China’s economy expanded 4.7% year-on-year during the second quarter of 2024, slowing from a 5.3% increase recorded in the first quarter. This raises concerns about a slowdown in the world’s second-largest economy and declining fuel demand in the world’s largest oil importer, which in turn is seen as a key factor putting some downward pressure on crude oil prices.
Meanwhile, the US Dollar (USD) is gaining some positive traction and recovering further from the over three-month low touched on Monday, further contributing to shifting money flows away from the USD-denominated commodity. That said, the growing acceptance that the Federal Reserve (Fed) will begin the rate-cutting cycle as early as September could restrain USD bulls from placing aggressive bets and positioning for further gains.
Apart from this, concerns over supply disruptions arising from the ongoing conflicts in the Middle East should act as a tailwind for crude oil prices and help limit deeper losses. Therefore, it will be prudent to wait for continued strong selling before positioning for an extension of the recent pullback from the vicinity of the $84.0 mark, or the over two-month peak touched on July 5. Traders are now looking at US retail sales for fresh impetus.
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.
