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- WTI rises above $83.00 due to expected summer demand
WTI rises above $83.00 due to expected summer demand
- WTI price extends gains due to increased expectations for higher US Oil demand during the summer travel season.
- American Automobile Association projects a 5.2% increase in travel, with car travel alone rising by 4.8% this year.
- Oil prices may gain ground as recent US inflation data raised the expectations of the Fed reducing rates in 2024.
West Texas Intermediate (WTI) crude Oil price extends gains for the second consecutive day on Tuesday, trading around the two-month high near $83.10 per barrel. Crude Oil prices appreciate due to heightened expectations for rising fuel demand from the summer travel season.
US Oil demand is expected to increase as the summer travel season peaks with the Independence Day holiday this week. According to the American Automobile Association (AAA), travel during this period is projected to be 5.2% higher than in 2023, with car travel alone rising by 4.8% compared to the previous year, Reuters reports.
Additionally, the recent US inflation data raised the expectations of the Federal Reserve (Fed) reducing interest rates in 2024. Lower interest rates could boost the economic growth of the United States (US), the world’s biggest Oil consumer, hence supporting the WTI price.
On Friday, the US Bureau of Economic Analysis reported that recent US inflation eased to its lowest annual rate in over three years. The US Personal Consumption Expenditures (PCE) Price Index increased by 2.6% year-over-year in May, down from 2.7% in April. Meanwhile, Core PCE inflation rose by 2.6% year-over-year in May, down from 2.8% in April.
In Japan, a fire broke out early Tuesday afternoon at Idemitsu Kosan's Chiba refinery, the country's second-largest Oil refiner. The refinery, located near Tokyo, operates a 190,000 barrels per day crude distillation unit (CDU).
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 13 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.
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