Oil prices fell modestly on Wednesday as investors reacted cautiously to the recent US-China trade agreement. The deal, which aims to ease restrictions on rare earths trade, lacks detailed terms, leading to a skeptical market response. Despite this, oil prices remain strong, holding above key support at $63.45 per barrel.
The trade talks concluded late Tuesday with an agreement reportedly returning trade relations to the terms set during the Geneva summit last month. However, the deal still requires approval by the presidents of both countries.
From a technical perspective, West Texas Intermediate (WTI) crude oil maintains a bullish trend as long as prices stay above $63.45. After pulling back from a recent high near $65.40, prices found support above this level, indicating buyers are active on dips. The 4-hour Relative Strength Index (RSI) remains positive, above 50, supporting the upward momentum.
On the upside, the next resistance zone lies between $65.30 and $65.60, where the June 10 high aligns with a key Fibonacci extension. Should prices break above this range, the next target is around $69.10. Conversely, a drop below $63.45 could shift focus to the $62.00 level, which marks a recent low.
What is WTI Oil?
WTI, or West Texas Intermediate, is a high-quality crude oil benchmark widely used in global markets. It is known as “light” and “sweet” due to its low density and sulfur content, making it easier to refine. WTI is sourced in the United States and traded primarily through the Cushing hub.
Factors Influencing WTI Prices
WTI prices are driven mainly by supply and demand dynamics. Global economic growth boosts demand, while political tensions, conflicts, and sanctions can disrupt supply and raise prices. Decisions by OPEC and its allies to adjust production quotas also significantly impact prices. Additionally, the value of the US dollar affects oil costs since oil is priced in dollars; a weaker dollar generally supports higher oil prices.
Impact of Inventory Reports
Weekly inventory data from the American Petroleum Institute (API) and the Energy Information Agency (EIA) influence WTI prices. Declining inventories suggest stronger demand, pushing prices up, while rising stocks indicate oversupply, leading to lower prices. The EIA’s reports are considered more reliable and are closely watched by traders.
OPEC’s Role in Oil Pricing
OPEC, a coalition of major oil-producing countries, meets twice a year to set production targets. Reducing output tends to tighten supply and raise prices, while increasing production has the opposite effect. The extended group, OPEC+, includes additional producers like Russia, further shaping global oil supply and prices.
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