WTI hovers around $82.00 as soft inflation raises the odds of Fed rate cuts
- WTI price receives support as easing inflation data has heightened expectations of a Fed rate cut in September.
- The US Consumer Price Index declined by 0.1% MoM in June, marking its lowest level in more than three years.
- US gasoline demand reached 9.4 million barrels per day, the highest level for the Independence Day holiday week since 2019.
West Texas Intermediate (WTI) Oil price trades around $81.80 per barrel during Asian hours on Friday. Crude Oil prices have found support as softer-than-expected US Consumer Price Index (CPI) data for June has heightened expectations of a potential Federal Reserve (Fed) rate cut in September. Lower borrowing costs support the US economy, the largest Oil consumer in the world, which in turn boosts crude Oil demand.
The US Consumer Price Index (CPI) declined by 0.1% month-over-month in June, marking its lowest level in more than three years. The core CPI, which excludes volatile food and energy prices, rose by 3.3% year-over-year in June, compared to May’s increase of 3.4% and the same expectation. Meanwhile, the core CPI increased by 0.1% month-over-month, against the expected and prior rise of 0.2%.
Federal Reserve Bank of Chicago President Austan Goolsbee said on Thursday that the US economy appears to be on track to achieve 2% inflation. This suggests Goolsbee is gaining confidence that the time for cutting interest rates may soon be approaching. He also stated “My view is, this is what the path to 2% looks like,” according to Reuters.
According to government data cited by Reuters, US gasoline demand reached 9.4 million barrels per day (bpd) in the week ending July 5, the highest level for the Independence Day holiday week since 2019. Jet fuel demand, on a four-week average basis, was at its strongest since January 2020. This robust fuel demand has prompted US refineries to increase activity and draw from crude Oil stockpiles, thereby supporting prices.
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.