- WTI rebounds from an eight-week low of $74.24 hit on Tuesday.
- Oil prices are gaining ground as tensions in the Middle East pose risks to oil supplies.
- Crude oil prices may receive support from increasing odds of a Fed rate cut in September.
The price of West Texas Intermediate (WTI) crude oil is trading around $75.70 per barrel at the time of writing. WTI rebounded from an eight-week low of $74.24 hit on Tuesday, attributed to rising geopolitical tensions in the Middle East that pose risks to oil supply.
The Israeli government claims to have killed Hezbollah’s top commander in an airstrike in Beirut on Tuesday, in retaliation for Saturday’s cross-border rocket attack on Israel. The escalation came despite diplomatic efforts by U.S. and U.N. officials to avert a wider conflict that could inflame the entire Middle East, according to Reuters.
The Federal Reserve (Fed) is expected to hold current interest rates on Wednesday. However, there is growing speculation about a possible rate cut in September. This expectation could boost economic activity in the United States, the world’s largest consumer of crude oil, thus supporting demand for the liquid gold.
However, a weak economic outlook in China, the world’s largest crude importer, is limiting oil price gains. China’s manufacturing activity in July contracted for a third straight month, according to an official factory survey released on Wednesday.
The Organization of the Petroleum Exporting Countries and allies led by Russia (OPEC+) will hold an online meeting of the Joint Ministerial Monitoring Committee (JMMC) on Thursday. According to Reuters, the group is unlikely to make changes to its current agreement to reduce production and plans to start undoing some of these cuts from October.
The U.S. Energy Information Administration (EIA) will report the change in crude oil stocks later in the North American session. The market is anticipating a decline of 1.60 million barrels for the week ending July 26, following a decline of 3.741 million barrels the previous week.
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.
