WTI holds below $70.00 amid demand concerns
- WTI price holds steady near $69.75 in Friday’s early Asian session.
- Continued soft demand in China drags the WTI price lower.
- A delay in OPEC+ supply increase and encouraging reports from weekly US crude oil inventories might cap WTI’s downside.
West Texas Intermediate (WTI), the US crude Oil benchmark, is trading around $69.75 on Friday. WTI price edges lower to a fresh 2024 low amid worries about demand in the US and China. However, the delay in OPEC+ oil output increase and a rise in large crude oil inventory draw might help limit WTI’s losses.
The concerns about the Chinese sluggish economy and oil demand undermine the WTI prices as China is the world’s largest importer of crude oil. The weaker-than-expected Chinese NBS Manufacturing PMI released on the weekend and the softer Caixin Manufacturing PMI on Wednesday contributed to the WTI’s downside.
However, the downside of the black gold might be limited due to positive news from the Organization of the Petroleum Exporting Countries and allies (OPEC+) and the rise in large crude inventory draws.
OPEC+ has agreed to delay planned output increases for October and November, per Reuters on Thursday. ''Libyan production is expected to resume after the settlement of disputes in the country, which also weighed on crude oil prices. However, the OPEC+ decision could support crude oil prices at lower levels. The dollar index also plunged amid strength in the Japanese Yen and may support crude oil prices at lower levels,'' said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
US crude oil inventories fell more than expected last week. According to the US Energy Information Administration (EIA), crude oil stockpiles in the United States for the week ending August 30 declined by 6.873 million barrels, compared to a decrease of 0.846 million barrels in the previous week. The market consensus estimated that stocks would decline by just 0.9 million barrels.
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 13 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.