- WTI price extends gains on rising expectations of higher US oil demand during the summer travel season.
- The American Automobile Association projects a 5.2% increase in travel, with car trips rising 4.8% this year.
- Oil prices may gain ground as recent US inflation data raised expectations that the Fed will cut rates in 2024.
West Texas Intermediate (WTI) crude oil prices extended gains for a second straight day on Tuesday, trading near a two-month high around $83.10 per barrel. Crude oil prices are appreciating on heightened expectations of increased fuel demand due to the summer travel season.
U.S. oil demand is expected to rise as the summer travel season peaks with the Independence Day holiday this week. According to the American Automobile Association (AAA), travel during this period is projected to be 5.2% higher than in 2023, with car trips increasing 4.8% compared to the previous year, Reuters reports.
Moreover, recent US inflation data raised expectations that the Federal Reserve (Fed) will cut interest rates in 2024. Lower interest rates could boost economic growth in the United States (US), the world’s largest oil consumer, thereby supporting the price of WTI.
On Friday, the U.S. Bureau of Economic Analysis reported that recent inflation in the U.S. slowed to its lowest annual rate in more than three years. The U.S. Personal Consumption Price Index (PCE) rose 2.6% year-over-year in May, down from 2.7% in April. Meanwhile, core PCE inflation rose 2.6% year-over-year in May, down from 2.8% in April.
In Japan, a fire broke out early Tuesday afternoon at Idemitsu Kosan’s Chiba refinery, the country’s second-largest oil refinery. The refinery, located near Tokyo, operates a 190,000 barrel-per-day crude distillation unit (CDU).
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.
