- WTI lacks firm intraday direction on Tuesday amid mixed fundamental signals.
- Concerns about slowing demand continue to act as a headwind for oil prices.
- Tensions in the Middle East warrant some caution before positioning for further losses.
US West Texas Intermediate (WTI) crude oil prices struggle to capitalize on the previous day’s modest gains and oscillate in a narrow band, around the $69.70-$69.75 area during the Asian session of the Tuesday. Meanwhile, the commodity remains a considerable distance from a near three-week low hit last Friday and appears vulnerable to prolonging the recent decline seen over the past two weeks or so.
The initial market reaction to an interest rate cut by the People’s Bank of China (PBOC) on Monday turned out to be short-lived amid concerns about slowing demand, which continues to act as a headwind for investors. crude oil prices. The Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) cut their global demand forecast last month amid an economic downturn in China, the world’s largest oil importer. Fears were further fueled by a late-night warning from IEA chief Fatih Birol, who said weakness in China will continue to weigh on global oil demand in the coming years.
Apart from this, the recent rally in the US Dollar (USD) to its highest level since early August, triggered by expectations of less aggressive policy easing by the Federal Reserve (Fed), helps limit the rise in crude oil prices. That said, the risk of further escalation in the Middle East conflict, which could impact supplies in the key oil-producing region, offers some support to the black liquid. This, in turn, warrants some caution for bears and positioning for an extension of the recent sharp decline from near the $78.00 mark, or a near two-month high reached on October 8.
WTI Oil FAQs
WTI oil is a type of crude oil that is sold in international markets. WTI stands for West Texas Intermediate, one of the 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 facility, considered “the pipeline junction 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 that determine the price of WTI 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 alter supply and impact prices. The decisions of OPEC, 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, as oil is primarily traded in US dollars, so a weaker Dollar can make oil more affordable and vice versa.
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 the fluctuation of supply and demand. If the data shows a decline in inventories, it may indicate an increase in demand, which would drive up the price of oil. An increase in inventories can reflect an increase in supply, which drives down prices. The API report is published every Tuesday and the EIA report the next day. Their results are usually similar, with a difference of 1% between them 75% of the time. EIA data is considered more reliable since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 13 oil-producing nations that collectively decide member countries’ production quotas at biannual 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 member countries, including 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.
