WTI falls to near $63.50 due to oversupply, weaker demand concerns
- WTI price falls as OPEC+ ramped up Oil output.
- Oil demand expectations weaken due to the end of the US summer driving season.
- Ukrainian President Zelenskiy pledged to carry out additional strikes deep inside Russia.
West Texas Intermediate (WTI) Oil price extends its losses for the second successive session, trading around $63.50 per troy ounce during the Asian hours on Monday. Crude Oil prices decline due to potential for oversupply concerns and weaker demand prospects.
Traders are looking ahead to the OPEC+, Organization of the Petroleum Exporting Countries and its allies, meeting later this week, where accelerated Oil output increases are boosting the global supply outlook. However, much of this additional supply has yet to reach the United States (US), the world’s largest fuel market, where the end of the summer driving season is already dampening demand expectations.
However, the downside of the Oil prices could be restrained due to increased geopolitical risk premiums, driven by the ongoing Russia-Ukraine war and the potential for tighter US sanctions that could curb global flows.
Ukrainian President Volodymyr Zelenskiy vowed on Sunday to launch further strikes deep inside Russia in response to Russian drone attacks on power facilities in northern and southern Ukraine. In recent weeks, both sides have stepped up airstrikes, focusing on energy infrastructure and disrupting Russian oil exports, per Reuters.
Traders are weighing whether India will bow to US pressure to halt Russian Oil imports, following Washington’s imposition of secondary tariffs on New Delhi last week. Meanwhile, the upcoming SCO summit is in focus, with Chinese President Xi, Russian President Putin, and Indian Prime Minister Modi all expected to attend.
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.