WTI remains below $68.50 amid firmer US Dollar, OPEC+ meeting in focus

WTI

FXStreetDec 2, 2024 5:59 AM

WTI drops to near $68.25 on a stronger USD in Monday’s early European session.
Improved Chinese economic data and geopolitical risks might cap the WTI’s downside.
Oil traders brace for the OPEC+ meeting on Thursday for fresh impetus.

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $68.25 on Monday. The WTI price edges lower as the stronger US Dollar (USD) broadly drags the USD-denominated commodity price lower.

US President-elect Donald Trump's statement that he will impose tariffs has led to fears that it could slow the pace of the Federal Reserve's (Fed) easing cycle, boosting the USD. The rise of the USD against other currencies generally lowers oil demand by making oil more expensive for those who use foreign currencies. According to the CME FedWatch Tool, the money markets have priced in a nearly 67.1% chance that the Fed will cut rates by a quarter point in December, while there is a 32.9% probability that the policy rate will remain unchanged.

The encouraging Chinese economic data released on Monday could provide some support to the black gold, as China is a major consumer of crude oil in the global market. China’s Caixin Manufacturing PMI jumped to 51.5 in November versus 50.3 in October, beating the estimation of 50.5. This growth was driven by the increase in foreign orders since February 2023 and exports.

Furthermore, heightened geopolitical tensions in West Asia raise concerns about supply disruptions from the region, which might lift the WTI price. Iran extended its support to the Syrian government after insurgents took control of Syria’s Aleppo city.

Looking ahead, Oil traders will keep an eye on the OPEC+ (Organization of the Petroleum Exporting Countries, and allies) meeting on Thursday to discuss output policy for 2025. The meeting was originally scheduled for Sunday. "An indefinite delay may be the best case for oil prices, given that earlier rounds of delays by a month or so have failed to drive higher oil prices in line with what OPEC+ intended,” said Tony Sycamore, IG's Sydney-based market analyst.

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.

Disclaimer: For information purposes only. Past performance is not indicative of future results.