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Recently, the price of West Texas Intermediate (WTI) crude oil has been under pressure and continues to fall. As the meeting of the Organization of the Petroleum Exporting Countries and its allies (OPEC+) approaches, WTI crude oil has fallen for three consecutive days. This week, WTI was close to $61.50 per barrel over the weekend, down about 2.70%, marking its lowest point since June and potentially facing its first weekly decline in three weeks.
The reason for the recent sharp sell-off is that investors are assessing potential supply adjustments by OPEC+. According to authoritative sources, Saudi Arabia is pushing OPEC+ to accelerate the restoration of the previously cut supply of about 1.66 million barrels per day, intending to reclaim global market share. Although representatives emphasize that no final decision has been made, maintaining production levels could be another option. Sources indicate that the resolution to increase supply may be discussed and finalized this weekend or could be postponed until later this year. However, some member countries may resist the production increase plan as they prefer to maintain current high prices.
The unexpected increase in U.S. oil inventories has also intensified the market's pessimism, further exacerbating concerns about oversupply. At the same time, energy stocks have followed oil prices down, reflecting investors' worries about OPEC+ increasing supply ahead of schedule and weak demand affecting U.S. stock indices.
Currently, WTI is below the 50-day Simple Moving Average (SMA) at $64.90, and the earlier rebound has failed, keeping the short-term trend bearish. The price is currently hovering above the support zone at $61.50, which has prevented price declines multiple times in August. If the daily or weekly close falls below this level, the next downside targets could be around $59.50 and $58.50, and it may even extend to $57. If the price rebounds, the primary target is to break through the $62.50-$63.50 zone, after which it will face strong resistance from the 50-day SMA. Before reaching these price levels, any upward movement is likely to encounter selling pressure.
The Relative Strength Index (RSI) is currently around 39, indicating a persistent downtrend, but it has not yet reached the oversold area, suggesting that there may still be room for decline. However, be aware that there could be a rebound opportunity when prices are close to the support area, especially if they can hold above 61 dollars.
Common questions about WTI oil:
**What is WTI crude oil?**
WTI crude oil is a type of crude oil sold on the international market. WTI stands for West Texas Intermediate, and it is one of the three main types of crude oil (the other two being Brent and Dubai crude). WTI is referred to as "light" and "sweet" due to its lower specific gravity and sulfur content, making it a high-quality and easily refined crude oil. It originates from the United States and is distributed through the Cushing hub, known as the "world's pipeline crossroads." WTI prices are often cited by the media and serve as a benchmark in the oil market.
**What factors influence the price of WTI crude oil?**
The supply and demand relationship is a key driver of WTI oil prices. For example, global economic growth can stimulate demand, and vice versa. In addition, political instability, wars, and sanctions can disrupt supply and thus affect prices. The decisions made by the OPEC organization are also important factors influencing oil prices. Since crude oil is mainly traded in US dollars, the value of the dollar is also very important to WTI oil prices; a weaker dollar usually makes crude oil cheaper, and vice versa.
**How does inventory data affect the price of WTI crude oil?**
The weekly crude oil inventory report released by the American Petroleum Institute (API) and the Energy Information Administration (EIA) affects WTI crude oil prices. Changes in inventory reflect supply and demand fluctuations. If the data shows a decrease in inventory, it indicates an increase in demand, driving oil prices up. Higher inventory means increased supply, which lowers prices. The API releases its report every Tuesday, while the EIA follows the next day. The results of both are usually similar, with a difference of less than 1% in 75% of cases. Since the EIA is a government agency, its data is generally considered more reliable.
**How does OPEC influence WTI crude oil prices?**
OPEC (Organization of the Petroleum Exporting Countries) consists of 12 oil-producing countries, and member countries collectively decide on production quotas at meetings held twice a year, which can directly affect oil prices. When OPEC decides to lower quotas, it may tighten supply and push up oil prices. Conversely, it can lower prices. OPEC+ includes an additional 10 non-OPEC member countries, the most notable of which is Russia.
Disclaimer: This article is for informational reference only, and past performance does not guarantee future results.