WTI declines below $60.00 on firmer US Dollar

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WTI price edges lower to near $59.90 in Tuesday’s early Asian session.
Speculation that the US is close to reopening the government might cap the downside for the WTI.
API weekly crude oil stock report and the OPEC monthly oil market report for November will be the highlights on Wednesday.

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $59.90 during the early Asian trading hours on Tuesday. The WTI declines amid the stronger US Dollar (USD) and concerns about global energy demand. Traders brace for the American Petroleum Institute (API) weekly crude oil stock report and the OPEC monthly oil market report for November, which will be released on Wednesday.

Concerns about energy demand weigh on oil prices, as Saudi Arabia last Thursday cut the price of its major crude grade to Asia for delivery next month to the lowest level in 11 months.

The Organization of the Petroleum Exporting Countries and its allies (OPEC+) announced earlier this month that the group will raise production by 137,000 barrels per day (bpd) in December but will then pause the production hikes in the first quarter (Q1) next year, fueling fears of a global glut.

On the other hand, signs of progress towards ending the US government shutdown could provide some support to the WTI price. On Sunday, a group of eight Senate Democrats broke with their party to vote with Republicans to advance a bill to reopen the government.

US President Donald Trump on Monday voiced support for a bipartisan agreement to end the US shutdown, a significant step that makes it likely the government will reopen within days. Meanwhile, Senate Majority Leader John Thune said that he expects Trump to sign it into law once Congress passes the legislation.

WTI Oil FAQs

What is WTI Oil?

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.

What factors drive the price of WTI Oil?

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.

How does inventory data impact the price of WTI Oil

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.

How does OPEC influence the price of WTI Oil?

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.