WTI edges lower to near $60.00 on OPEC+ output plans | FXStreet
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $60.15 during the early Asian trading hours on Wednesday. The WTI declines amid a potential plan by the Petroleum Exporting Countries and its allies (OPEC+) to raise output. Traders await the Energy Information Administration (EIA) crude oil stocks change report later on Wednesday.
OPEC+ is reportedly considering a modest production increase in December, four sources familiar with the talks told Reuters. The group is likely to agree on Sunday to increase December output targets by another 137,000 barrels per day (bpd). While the base scenario assumes restoring output to around 1.66 million bps, there is still no consensus on the pace of further expansion. The decision to increase oil output could weigh on the WTI in the near term.
“Rising OPEC+ output could help offset any curtailment to Russian barrels following US sanctions,” said Andrew Lipow, president of Lipow Oil Associates.
Data released by the American Petroleum Institute (API) on Tuesday showed that crude oil stockpiles in the US for the week ending October 24 fell by 4 million barrels compared to a decline of 2.98 million barrels in the previous week. Crude oil inventories in the US are so far showing a net loss of 6.4 million barrels for the year, according to Oilprice calculations of API data.
Oil traders will closely monitor the Federal Reserve (Fed) interest rate decision later on Wednesday. The Fed is widely anticipated to cut its benchmark interest rate by 25 basis points (bps) at the conclusion of its October meeting on Wednesday. This would bring the Federal Funds Rate target to 3.75%-4.00%. Lower interest rates generally weaken the US Dollar (USD) as it makes oil cheaper for foreign buyers, boosting global demand and lifting WTI 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 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.