WTI struggles near $61.75 area, over one-week low amid demand concerns
- WTI struggles to attract buyers amid worries that the US-China trade war will dent fuel demand.
- OPEC+ plans to increase output and perceived progress on the Iran nuclear deal also exert pressure.
- The underlying bearish sentiment surrounding the USD does little to impress bulls or lend support.
West Texas Intermediate (WTI) US Crude Oil prices struggle for a firm intraday direction during the Asian session on Tuesday and oscillate in a narrow band around the $61.75 area, just above a one-and-half-week low touched the previous day.
The US-China trade war continues to dominate the market sentiment amid mixed signals regarding the state of negotiations. Moreover, investors remain worried that ongoing conflict between the world's two largest economies could trigger a global recession and dent fuel demand, which is seen as acting as a headwind for Crude Oil prices.
Meanwhile, several members of OPEC+ reportedly will suggest an acceleration of output hikes for a second consecutive month in June. Furthermore, perceived progress in nuclear deal talks between the US and Iran raises oversupply concerns. This turns out to be another factor that undermines Crude Oil prices and contributes to capping the upside.
The aforementioned negative factors, to a larger extent, overshadow the underlying US Dollar (SD(bearish sentiment and suggest that the path of least resistance for the black liquid is to the downside. This, in turn, supports prospects for an eventual breakdown below a one-week-old range and an extension of the recent pullback from the $64.70 region.
Moving ahead, investors this week will confront the release of the official Chinese PMIs, which, along with key US macro data scheduled at the start of a new month, including the Nonfarm Payrolls (NFP), should provide some impetus to Crude Oil prices. Nevertheless, the fundamental backdrop warrants caution before placing any bullish bets around the black liquid.
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.