WTI edges lower to near $62.00 amid mounting supply glut fears
- WTI price declines to around $62.00 in Thursday’s early Asian session.
- Fears of a global oil oversupply undermine the WTI price.
- Oil inventories fell by 4.304 million barrels in the week ended May 30, according to the EIA.
- Heightened geopolitical risks and expectations that Iran will reject a US nuclear deal might cap the WTI’s downside.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $62.00 during the Asian trading hours on Thursday. The WTI price edges lower as Saudi Arabia signals it may push for a large production increase, raising fears of a global oil oversupply.
On Saturday, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) decided to increase their production again on Saturday. OPEC+ planned to raise production at a steady rate by 411,000 barrels per day (bpd) in July, following an increase in May and June.
Bloomberg reported that Saudi Arabia is open to additional crude production hikes in a bid to increase its market share, which is viewed as a strategy to reduce oil prices and punish overproducing OPEC+ members, such as Kazakhstan and Iraq. Concern about a global oil supply weighs on the WTI price.
US gasoline stocks swelled by 5.2 million barrels, the Energy Information Administration (EIA) reported. Analysts polled had expected a rise of 600,000 barrels. Meanwhile, US Crude oil inventories fell more than expected last week. The EIA weekly report showed crude oil stockpiles in the US for the week ending May 30 fell by 4.304 million barrels, compared to a decline of 2.795 million barrels in the previous week. The market consensus estimated that stocks would drop by 900,000 barrels.
On the other hand, doubts about a nuclear deal between the United States and Iran could help limit the WTI’s losses. Iranian Supreme Leader Ali Khamenei said that he doesn't think talks with the US will succeed, while US President Donald Trump stated that Tehran will face "something bad" if it doesn't quickly accept a US proposal over its nuclear program.
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.