WTI tumbles to near $62.00 on OPEC’s supply increase, potential demand concerns
- WTI plummets sharply to near $62.00 as OPEC+ is likely to increase oil production over three times from May onwards.
- Kazakhstan stated that the Oil production under quotas is impacting its fields.
- China denies of having any trade negotiations with the US.
West Texas Intermediate (WTI), futures on NYMEX, is down over 1% to near $62.00 during European trading hours on Friday. The Oil price is down to near the lower end of the weekly range as investors start discounting the impact of a significant increase in production by OPEC+ members in the near-term.
Latest reports pointing to a substantial increase in the Oil production over planned increments have weighed heavily on the Oil price. Reports from Reuters have shown that the OPEC+ will increase its output by 411,000 million barrels per day (bpd) from May onwards, three times more against 138K bpd as planned.
Statements from some of OPEC+ members, including Kazakhstan, that capacity underutilization is harming their oil fields have led them to prioritize their national interest group’s objectives.
Kazakh energy minister told Reuters on Wednesday the country was unable to curtail the output of independent oil majors on its territory and would not shut down its own oilfields as that would damage their future production.
Meanwhile, Beijing’s denial to any news stating discussions between China and Washington over trade deal has stoked uncertainty over the oil demand outlook again. This week, United States (US) President Donald Trump stated that “discussions with Beijing are going well” and added that he thinks “they will reach a deal”.
However, China clarified that there has not been any “economic and trade negotiations between China and the US,” a spokesperson from Chinese ministry said on Thursday. Additionally, China wants the US to “completely cancel all unilateral tariff measures” if it wants trade talks.
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.