- WTI edges higher to near $67.90 in Monday’s early Asian session.
- Middle East turmoil and China’s policy shift could underpin the WTI price in the near term.
- The cautious stance of the Fed might cap the WTI’s downside.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $67.90 on Tuesday. The WTI price recovers amid the rising geopolitical tensions in the Middle East after the downfall of Syrian President Bashar al-Assad.
Over the weekend, Syrian President Bashar al-Assad and his family fled to Moscow and were granted political asylum, ending 50 years of a brutal dictatorship. The downfall of the Syrian leader regime could lead to a conflict involving regional countries, lifting the WTI price.
Tomomichi Akuta of Mitsubishi UFJ Research noted that these geopolitical risks are bolstering crude prices but warned that Saudi Arabia’s recent price cuts and extended OPEC+ output constraints underscore weak demand fundamentals, especially from China.
Additionally, the black gold might be supported by the rising expectations that China will announce further stimulus measures and will unveil its first “moderately loose” monetary policy shift since 2010. “The easing of monetary policy stance in China is likely the driver of the oil price rebounding, supporting risk sentiment,” said UBS analyst Giovanni Staunovo.
On the other hand, the Federal Reserve (Fed) is likely to deliver another interest rate cut on December 18. Still, the US economic data will force the Fed’s outlook on interest rates to tilt more hawkish. This, in turn, might support the Greenback and weigh on the USD-denominated Canadian Dollar (CAD).
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.
