West Texas Intermediate (WTI) crude oil prices have taken a turn for the worse. They’re presently huddled just above the $61.75, which is a slide to more than a one-week low. Fears linked to the US-China trade war and rising production from OPEC+ have been the leading cause of this downturn. These issues are causing some alarm in the industry about longer-term demand and price stability. As negotiations between the U.S. and China—the world’s two largest economies—continue to intensify. Simultaneously, a potential breakthrough in negotiations over the Iran nuclear deal is further complicating market dynamics.
West Texas Intermediate (WTI) is the main U.S. crude oil benchmark. It largely originates in the U.S. and is delivered via the Cushing hub, often considered “The Pipeline Crossroads of the World.” This central hub has great influence over the logistics and pricing of crude oil not just across the United States, but all of North America. Frequently, the price of WTI moves in tandem with other major crude oil grades, including Brent and Dubai Crude. In fact, it has only deviated more than 1% from these benchmarks 75% of the time.
Influence of Inventory Reports
To understand oil supply and demand, the American Petroleum Institute (API) and the Energy Information Administration (EIA) release weekly oil inventory reports. Combined, these reports are a major driver of WTI price direction. As these reports come out and as the public sees more frequent demand forecasts, this can create volatility in pricing. The street’s investors pay a lot of attention to these releases for early signs of reversing market trends.
With the recent back and forth on rising and falling inventory levels, this has not done much to bolster WTI prices. The increasing unpredictability of these inflation-related data releases only complicates what has already been a baffling landscape for traders and investors.
“The Pipeline Crossroads of the World” – source not mentioned
Geopolitical Factors at Play
The US-China trade war remains the overhanging sentiment in the market, keeping a lid on WTI prices. Fears that an extended period of rising US-China tensions could lead to a full-blown global economic slowdown are making investors wary. The prospect of reduced fuel consumption due to these geopolitical developments should continue to be a major headwind for WTI.
Would a new Iran nuclear negotiations sign of progress. This development has increased concerns over a possible oversupply in the crude oil market. An agreement would bring additional Iranian oil supplies into the market. In response, this influx would probably compel WTI prices downwards even more.
The unpredictable interaction between geopolitical considerations and oil supply chain developments is truly shaking the market. Consequently, WTI is having a hard time enticing buyers. Despite OPEC+’s plans to proactively increase output, market participants are still leery of a heavily oversaturated market.
Future Market Outlook
WTI is headed in the opposite direction. If so, it’s on track to fall below the range it set for itself over the last week, furthering its pullback from recent highs around $64.70. This possible move has many investors running for the hills, all while having heightened concerns about the future direction of crude oil prices.
Those indicators, due out in the coming weeks, will be critical drivers of WTI prices. Most notably the release of official Chinese PMIs and important U.S. macro such as Nonfarm Payrolls (NFP), which should move markets heavily. Analysts argue that these seemingly bullish (or bearish) data points might be enough to create the catalyst for a price recovery or continued slump.
“light” and “sweet” – source not mentioned