The price of West Texas Intermediate (WTI) Crude Oil has dropped to $58.50. This decrease follows the restart of production in Iraq, particularly at the West Qurna 2 field, which produces over 460,000 barrels daily. The increase in supply is putting pressure on prices. Geopolitical factors are keeping WTI prices from falling too much. The ongoing Ukraine-Russia conflict prevents a resolution, creating a risk premium on oil caused by limits on Russian exports.

Asian Import Dynamics

Changes in Asian imports are shifting global oil flows. China is buying more oil from Saudi Arabia and Iran. At the same time, US sanctions and lower demand have reduced imports from Russia. Market watchers are anticipating a 25-basis-point rate cut by the Federal Reserve. Lower rates may help energy demand by weakening the US Dollar. Traders are also waiting for the American Petroleum Institute’s weekly report for information on US stock levels. A larger than expected increase in inventory could push WTI prices lower, even with ongoing geopolitical tensions. WTI is a high-quality American crude oil. Its price depends on supply, demand, political events, and the value of the US Dollar. Inventory data from the API and the Energy Information Agency (EIA) greatly influence prices, with the EIA’s reports seen as more reliable.

Short Term Supply Story

Currently, WTI prices are under pressure, especially around the $58.50 mark, due to increased Iraqi production. However, this situation is likely temporary, with the market focusing on the Federal Reserve’s decision expected tomorrow. There is more than a 90% chance of a 25-basis-point rate cut, which could weaken the dollar and increase demand. Despite the issues in Iraq, the overall supply situation remains tight, helping to support prices. Ongoing geopolitical tensions linked to the stalled peace talks in Ukraine add a risk premium to the market. Importantly, voluntary production cuts by OPEC+ continue, with over 2 million barrels per day still in effect. These cuts will play a crucial role going into the new year. The American Petroleum Institute (API) report expected later today could be a significant factor in the short term. We are on the lookout for any surprises. Last week’s EIA data showed a surprise increase of 3.6 million barrels in inventory; another rise could temporarily push WTI below $58. This potential volatility suggests that strategies like straddles may be useful for traders aiming to profit from price fluctuations after the data and Fed announcement. The Fed’s expected shift to a more supportive policy is a major positive factor to consider. Looking back to the last rate-cutting cycle that started in 2019, a weaker dollar helped boost commodity prices. A rate cut tomorrow could reinforce this trend, making oil priced in USD more appealing and possibly attracting more investment to the energy sector. Create your live VT Markets account and start trading now.

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