WTI edges lower below $63.50 on concerns over oil demand
- WTI price drifts lower to near $63.40 in Thursday’s early European session.
- Persistent oversupply and soft fuel demand in the US weigh on the WTI.
- Fed delivered a rate cut at its September meeting while signaling further reductions this year, which might help limit the WTI’s losses.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $63.40 during the early European trading hours on Thursday. The WTI declines amid concerns over the US economy and excess supplies. Traders continue to assess the Federal Reserve’s (Fed) rhetoric on further interest rate cuts.
US crude inventories posted a sharp decline last week as net imports fell to a record low and exports climbed to their highest level in nearly two years. Data released by the US Energy Information Administration (EIA) on Wednesday showed that crude oil stockpiles in the US for the week ending September 12 fell by 9.285 million barrels, compared to a rise of 3.939 million barrels in the previous week. The market consensus estimated that stocks would decline by 1.5 million barrels.
Nonetheless, a larger-than-expected rise in distillate stockpiles, which increased by 4 million barrels versus predictions of a 1 million barrel increase, raised worries about demand in the world's top oil consumer and undermined the WTI price.
The Federal Reserve (Fed) decided to cut the interest rates by a quarter percentage point at its September meeting on Wednesday. This is the Fed's first reduction this year and puts the target range for its main lending rate at 4.0% - 4.25%. The US central bank penciled in two more reductions this year. Lower interest rates generally support oil demand, and the Fed’s guidance suggests it now views risks from rising unemployment as outweighing those from persistent inflation.
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.