Below $87: WTI Oil pares gains on bets of a steeper Fed tightening cycle

$87.00 gives way as WTI Oil slips on Friday, having met resistance at $88.20.
Prices face pressure from expectations that faster Fed tightening will restrain US oil demand.
An unexpected rise in US oil inventories in the week of November 6 has helped alleviate supply concerns.

West Texas Intermediate (WTI) Oil is down 1.2% on Friday. The US benchmark has reached session lows below $87.00 after rebounding more than 3% on Thursday. Oil prices are pulling back moderately as expectations of more aggressive monetary tightening by the Federal Reserve (Fed), and the resulting constraint on US oil consumption, outweigh concerns over the stalled Middle East conflict.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

A half-point rate rise in December and faster monetary tightening over the coming months are now the subject of speculation following this week’s US Consumer Price Index (CPI) release. Remarks from key Fed officials have reinforced that view. Such a policy path would restrain US economic growth and, most likely, reduce oil consumption.

US Oil Inventories Post Unexpected Increase

Meanwhile, the US Energy Information Administration (EIA) reported a 4,657 million barrel increase in crude oil inventories for the week ending on November 6. Markets had expected a 1.1 million barrel decline, following a 0.8 million barrel fall the previous week.

A previous American Petroleum Institute (AIP) report showed a similar result. Together, the figures have helped allay fears of an oil shortage, at least for now.

Further losses in crude oil are being limited by developments in the Middle East. Efforts to restart negotiations between Washington and Tehran appear to have stalled. US President Trump extinguished the remaining hopes of a breakthrough, declaring that “we don’t need a deal with Iran.”

The US controls the Strait of Hormuz, Trump also asserted. However, attacks on vessels seeking passage through the waterway have intensified over recent weeks, seriously undermining the credibility of his claim. Before the war, the strait carried about 20% of global supply.

WTI Oil: Key Questions

What defines WTI Oil?

Traded internationally, WTI Oil takes its name from West Texas Intermediate. It is one of three major crude oil types, alongside Brent and Dubai Crude. Its relatively low gravity earns it the description “light”, while its low sulphur content makes it “sweet”. This high-quality oil is easy to refine. Produced in the United States, it is distributed through the Cushing hub, known as “The Pipeline Crossroads of the World”. WTI serves as an oil market benchmark, with its price regularly cited by the media.

Which forces shape WTI Oil prices?

Supply and demand underpin WTI Oil prices, as they do those of other assets. Stronger global growth can lift demand, while weaker growth can reduce it. On the supply side, political instability, wars and sanctions can disrupt flows and affect prices. Decisions by OPEC, a group of major oil-producing countries, are another important influence. WTI Crude Oil is also sensitive to the US Dollar because oil is traded predominantly in that currency. A weaker US Dollar can therefore make oil more affordable, while a stronger currency has the reverse effect.

Why do inventory figures affect WTI Oil prices?

Weekly inventory releases from the American Petroleum Institute (API) and the Energy Information Agency (EIA) influence WTI Oil prices by signalling shifts in supply and demand. Falling inventories may point to stronger demand and lift prices. Conversely, a stock build can indicate greater supply and put prices under pressure. The API publishes its report each Tuesday, followed by the EIA the next day. The two sets of figures generally align: 75% of the time, they are within 1% of one another. As the EIA is a government agency, its data is regarded as more reliable.

How do OPEC decisions affect WTI Oil prices?

At meetings held twice a year, the 12 oil-producing nations in OPEC (Organization of the Petroleum Exporting Countries) jointly set production quotas for members. These decisions frequently influence WTI Oil prices. Lower quotas can restrict supply and lift oil prices; increased production has the reverse effect. The broader OPEC+ group includes ten additional non-OPEC members, most notably Russia.