WTI consolidates around $69.65-$69.70 area, below monthly peak set on Thursday
- WTI oscillates in a narrow trading band and is influenced by a combination of diverging factors.
- Concerns about slowing fuel demand and increasing supply act as a headwind for the commodity.
- Geopolitical risks remain in play and hold back bears from placing bets around the black liquid.
West Texas Intermediate (WTI) US Crude Oil prices struggle to gain any meaningful traction during the Asian session on Friday and remain on the defensive below the monthly top, around the $70.30 area touched the previous day. The commodity currently trades around the $69.65 region, down 0.20% for the day, though it remains on track to register strong weekly gains amid mixed fundamental cues.
The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, last week decided to postpone planned supply increases by three months until April and extend the full unwinding of cuts by a year until the end of 2026. This, along with Saudi Arabia's move to cut oil prices for Asian buyers, highlights concern about a slowdown in demand, which, in turn, acts as a headwind for the black liquid.
Meanwhile, the International Energy Agency, in its monthly report, expected non-OPEC+ nations to boost supply by about 1.5 million barrels per day (bpd) next year, exceeding demand growth forecast of 1.1 million bpd. This turns out to be another factor capping Crude Oil prices. The downside, however, remains cushioned amid concerns about supply disruptions stemming from tighter sanctions on Russia and Iran.
Furthermore, hopes that Chinese stimulus measures could lift demand in the world's top oil importer and signs of US economic resilience offer some support to the commodity. The mixed fundamental backdrop, along with the recent range-bound price action witnessed over the past two months or so, warrants some caution before placing aggressive directional bets around Crude Oil prices.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of 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 via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US 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) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.