- WTI Oil remains flat near $65 after its worst week in years.
- The ceasefire in the Middle East has triggered a $12 sell-off on WTI prices.
- The weak global economic outlook, coupled with expectations of supply hikes, is weighing on Crude.
Oil prices are trading within a narrow range around $65.00 on Friday, consolidating losses, on track to their largest weekly sell-off in years, following a nearly $12 depreciation after Trump announced a truce in the Israel-Iran war.
A fragile ceasefire is holding so far, and investors have shifted their focus to the uncertain global economic outlook. The lack of progress on trade deals between the US and its main partners, weak US data revealing that the world’s major economy is losing momentum, and the uninspiring figures from China and the EU are pointing to a grim outlook for global Crude demand in the coming months.
Weak demand outlook and higher output threaten with an Oil glut
Beyond that, OPEC+ countries are meeting in early June and are widely expected to approve another supply hike, which might increase concerns of an oversupply and add negative pressure on prices.
In this context, the larger.than expected decline in US Crude stocks reported by the US Energy Information Administration on the week of June 20 has passed practically unnoticed by the market.
Today, all eyes will be on the US PCE Price Index report, which is expected to show that inflationary pressures remain at moderate levels despite higher tariffs. If the final data supports the idea that the Fed might cut rates in July or September, hopes for an improving economic activity might have a moderate positive impact in Oil.
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.
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