WTI falls to near $61.00, weekly gains capped by global oversupply concerns
- WTI set for weekly gains due to renewed optimism over US-China trade deal, but upside capped by supply concerns.
- The initial US-China trade agreement helped ease demand worries from the world's top two Oil consumers.
- A possible US-Iran nuclear deal could result in sanctions relief and may add approximately 400,000 barrels per day to global supply.
West Texas Intermediate (WTI) Oil price continues its losing streak for the third successive session, trading around 61.10 per barrel during the early European hours on Friday. However, crude Oil prices are set for a modest weekly gain, supported by renewed optimism over United States (US)-China trade relations, which outweighed ongoing concerns about global oversupply.
Earlier this week, the US and China reached a preliminary trade agreement. The US will reduce tariffs on Chinese goods from 145% to 30%, while China will lower tariffs on US imports from 125% to 10%. This breakthrough eased demand concerns from the world's two largest Oil consumers.
However, upside momentum for Oil prices was limited by reports suggesting a potential US-Iran nuclear deal that could lead to sanctions relief. US President Donald Trump stated the US was close to an agreement, with Iran "sort of" accepting the terms. Still, sources indicated that key issues remain unresolved. According to a Reuters report citing ING analysts, a nuclear deal would reduce supply risk and allow Iran to ramp up production, potentially adding around 400,000 barrels per day to the global market.
Further pressuring crude Oil prices, US government data showed an unexpected rise in crude inventories. Meanwhile, the International Energy Agency (IEA) raised its global supply forecast by 380,000 barrels per day, citing increased output from Saudi Arabia and other OPEC+ members as they continue to unwind production cuts.
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.