WTI stabilizes around $64.00 as traders eye US-Iran talks amid supply glut risks
- WTI consolidates during the Asian session as traders seem reluctant ahead of the US-Iran talks.
- Supply glut concerns and the recent USD recovery from a four-year trough cap the black liquid.
- Traders now look forward to the US macro data for short-term opportunities later this Thursday.
West Texas Intermediate (WTI) US Crude Oil prices seem to have stabilized following the previous day's good two-way price moves and traded around the $64.00 mark during the Asian session on Thursday. The commodity, however, remains below an over a five-month high, touched last week, as traders keenly await US-Iran nuclear talks.
Despite heightened risk of a military confrontation, officials for both sides said that the US and Iran have agreed to hold talks in Oman on Friday to discuss the latter's nuclear program. Meanwhile, US insistence on dealing with non-nuclear issues could jeopardize the talks, leaving open the possibility that President Donald Trump could carry out his threat to strike Iran. This keeps the geopolitical risk premium in play and lends support to Crude Oil prices.
However, a surge in Venezuelan oil exports, along with forecasts of milder weather in the US and the recent US Dollar (USD) recovery from a four-year low, acts as a headwind for the USD-denominated commodity. The USD Index (DXY), which tracks the Greenback against a basket of currencies. stands firm near a two-week high amid expectations that Trump’s nomination for the next Federal Reserve (Fed) chair, Kevin Warsh, will be less dovish than expected.
Apart from this, worries about a major supply glut back the case for some near-term weakness in Crude Oil prices. Traders, however, might refrain from placing aggressive directional bets and opt to wait on the sidelines ahead of the key event risk. In the meantime, Thursday's release of the US JOLTS Jobs Opening data and the usual US Weekly Initial Jobless Claims would be looked upon to grab short-term opportunities later during the North American session.
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.
Nothing in this material constitutes investment advice, personal recommendation, investment research, an offer, or a solicitation to buy or sell any financial instrument. The content has been prepared without consideration of your individual investment objectives, financial situation, or needs, and should not be treated as such.
Past performance is not a reliable indicator of future performance and/or results. Forward-looking scenarios or forecasts are not a guarantee of future performance. Actual results may differ materially from those anticipated.
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