WTI sits near two-week high, just below $61.00 as traders await US-China trade deal details
- WTI enters a bullish consolidation phase near a two-week high amid mixed fundamental cues.
- The US-China trade deal optimism helps ease demand concerns and supports the black liquid.
- Easing US recession fears and the Fed’s hawkish pause benefits the USD and caps the commodity.
West Texas Intermediate (WTI) US Crude Oil prices rise to a nearly two-week high during the Asian session on Monday, though bulls struggle to find acceptance or build on the momentum beyond the $61.00 mark. The commodity currently trades with a mild positive bias just below the said handle as traders keenly await the joint statement from the US and China on trade talks.
The White House announced on Sunday that a trade deal with China had been reached following the high-stakes meeting in Switzerland over the weekend. The positive development helps ease demand concerns and acts as a tailwind for Crude Oil prices. However, neither side mentioned an agreement to cut US tariffs of 145% on Chinese goods and China's 125% tariffs on US goods. This, in turn, forces bullish traders to refrain from positioning for any meaningful upside and wait for further details before placing fresh directional bets.
Meanwhile, the trade optimism helps ease market concerns about a recession in the US. This, along with the Federal Reserve's (Fed) hawkish pause earlier this month, assists the US Dollar (USD) to stand firm near a multi-week high touched on Friday. Apart from this, the OPEC+ decision to speed up output increases continues to stoke fears of oversupply and contributes to capping the upside for Crude Oil prices. That said, expectations for tighter US supplies, along with persistent geopolitical risks, act as a tailwind for the black liquid.
This, in turn, warrants some caution before confirming that the commodity's bounce from the vicinity of the $55.00 psychological mark, or a nearly one-month low touched last Monday, has run out of steam. Traders now look forward to this week's release of US inflation figures, which, along with Fed Chair Jerome Powell's appearance on Thursday, will drive the buck and provide some meaningful impetus to Crude Oil 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.