The week began with WTI US crude Oil prices trading slightly lower, hovering just below the $68.00 mark, down more than 0.60% for the day. The decline was attributed to concerns over slowing fuel demand in China, the world’s largest Oil importer. The National Bureau of Statistics reported on Saturday that China’s Retail Sales and Industrial Production growth had slowed, triggering worries about a dip in demand for Oil. Additionally, Fixed Asset Investment for the January to August period was slower than forecasted, and the jobless rate climbed unexpectedly. These factors, along with downward revisions in demand forecasts by OPEC and the IEA, led to further selling pressure on Crude Oil prices.
Despite the bearish sentiment, the USD selling bias inspired by expectations of an aggressive interest rate cut by the Federal Reserve provided some support to Oil prices and limited the extent of the losses. As a result, it is recommended to exercise caution before making any significant directional bets. Waiting for more follow-through selling to confirm if the recent bounce from the lowest level since May 2023 has ended could be a wise approach before positioning for a potential resumption of the previous downtrend seen over the past few months.
WTI Oil, short for West Texas Intermediate, is a high-quality Crude Oil that is easily refined and sourced in the United States. It is regarded as a benchmark for the Oil market and its price is frequently quoted in the media. Like all assets, the supply and demand dynamics play a crucial role in determining WTI Oil prices. Global growth, political instability, wars, sanctions, and decisions made by OPEC are key drivers that can impact the price of WTI Oil. Additionally, the value of the US Dollar also influences Oil prices since Oil is primarily traded in US Dollars.
The weekly Oil inventory reports from the API and EIA have a significant impact on WTI Oil prices. These reports reflect changes in supply and demand and can influence market sentiment. A drop in inventories can indicate increased demand and push up Oil prices, while higher inventories can signal increased supply and push prices down. The API report is released every Tuesday, followed by the EIA report the next day. While the results are usually similar, the EIA data is considered more reliable as it is a government agency.
OPEC, a group of 13 Oil-producing countries, often makes decisions that impact WTI Oil prices. By collectively setting production quotas for member countries at biannual meetings, OPEC can influence the supply of Oil in the market. When OPEC decides to lower quotas, it tightens supply and boosts Oil prices. Conversely, an increase in production can lead to a decrease in prices. OPEC+’s expanded group, which includes ten non-OPEC members such as Russia, also plays a significant role in influencing Oil prices through production decisions. Keeping an eye on OPEC’s actions and announcements is crucial for understanding the factors driving WTI Oil prices.
