West Texas Intermediate (WTI) US Crude Oil prices extend the previous day’s sharp retracement slide from the $76.75 area, or a five-month peak, and attract some follow-through selling for the second straight day on Tuesday. The commodity, however, trims a part of its heavy Asian session losses to a nearly two-week low and currently trades just above the $66.00 mark, down over 1.30% for the day.
Investors took a sigh of relief in reaction to Iran’s restrained strike on a US military base in Qatar, instead of oil tankers in the Strait of Hormuz. Adding to this, US President Donald Trump announced a complete ceasefire between Israel and Iran. This helps ease market worries about supply disruptions from the Middle East – a major oil-producing region – and turns out to be a key factor weighing heavily on Crude Oil prices.
Meanwhile, Traders ramped up their bets for a potential interest rate cut by the Federal Reserve (Fed) in July following the release of mixed US PMIs and dovish-sounding remarks from influential FOMC members on Monday. This, along with receding safe-haven demand, drags the US Dollar (USD) to over a one-week low and benefits the USD-denominated commodities, assisting Oil prices to rebound from the $64.15 area.
Traders now look forward to the US economic docket – featuring the release of the Conference Board’s Consumer Confidence Index and the Richmond Manufacturing Index. Apart from this, speeches from influential FOMC members, including Fed Chair Jerome Powell’s congressional testimony, will drive the USD. This, along with geopolitical developments, should provide a fresh impetus to Oil prices later during the North American session.
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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