WTI moves away from over two-month peak, holds above $83.00 as traders await US NFP

July 5, 2024 4:09 am

  • WTI attracts some sellers on Friday and reverses a part of the previous day’s move up.
  • Geopolitical tensions and forecasts of a peak summer fuel demand could lend support.
  • Traders now look to the US NFP for short-term opportunities on the last day of the week.

West Texas Intermediate (WTI) US crude Oil prices tick lower during the Asian session on Friday and for now, seem to have snapped a two-day winning streak, albeit lack follow-through selling. The commodity currently trades around the $83.20-$83.15 region and remains well within the striking distance of its highest level since April 26 touched on Tuesday.

The recent data showed that members of the Organization of Petroleum Exporting Countries had increased production in June for a second consecutive month. This points a less tight Oil markets in the coming months, which, in turn, is holding back bulls from placing fresh bets and weighing on the black liquid. That said, concerns about persistent supply disruptions in the Middle East should act as a tailwind for Crude Oil prices and help limit losses. 

Moreover, the latest optimism over expectations of a pick up in fuel demand in the US during the travel-heavy summer season, along with speculations about OPEC+ cuts in the third quarter, should lend some support to Crude Oil prices. Adding to this, sustained US Dollar (USD) selling bias, amid bets that the Federal Reserve (Fed) will cut rates in September, suggests that the path of least resistance for the commodity remains to the upside. 

The aforementioned fundamental backdrop suggests that any subsequent downtick might still be seen as a buying opportunity, though China’s economic woes warrant caution before positioning for any further gains for Crude Oil prices. Nevertheless, the black liquid remains on track to register gains for the fourth successive week as market participants now look forward to the release of the US Nonfarm Payrolls (NFP) report for a fresh impetus.

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 13 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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