WTI bounces off one-week low and retakes $58.00 mark; lacks bullish conviction

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West Texas Intermediate (WTI) US Crude Oil prices rebound from the $58.70 area, or a one-week low touched during the Asian session, and fill a major part of the bearish gap opening on Monday. The commodity currently trades around the $59.20 region, down only 0.15% for the day, amid mixed cues.

WTI attracts some dip-buyers following a bearish gap opening at the start of a new week.
Concerns that the US military action against Iran could disrupt Oil supplies offer support.
Expectations that Trump’s Venezuela oil plan would increase supplies cap the black liquid.

Lingering worries about a possible US military strike against Iran, which could disrupt oil supplies, turned out to be a key factor acting as a tailwind for the black liquid. In fact, the US Navy’s aircraft carrier USS Abraham Lincoln pivoted west after operating in the South China Sea and was expected to arrive in the Persian Gulf this week. This keeps geopolitical risks in play and lends support to Crude Oil prices.

The upside potential, however, seems limited amid expectations that the US control of Venezuela’s oil will likely increase global supplies. US President Donald Trump had said earlier this month that Venezuela would be turning over 30 million to 50 million barrels of high-quality, sanctioned oil to the US. Moreover, Trump reportedly is planning to control the Venezuelan oil industry for several years to come.

This might deter traders from placing aggressive bullish bets around Crude Oil prices amid relatively thin trading volumes on the back of a holiday in the US. Hence, it will be prudent to wait for strong follow-through buying before confirming that the recent pullback from a nearly three-month top, levels just above the $62.00 mark touched last week, has run its course and positioning for further gains.

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.