WTI drifts higher above $70.50 on fears over Middle East supply disruptions
- WTI gains traction to near $70.60 in Thursday’s early Asian session.
- Middle East geopolitical tensions lift WTI price.
- Large US crude inventories built last week might cap the upside for WTI.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $70.60 on Thursday. The WTI price extends its upside as traders assess oil supply risks in the Middle East after Iran’s missile attack on Israel earlier this week.
Israel’s Prime Minister Benjamin Netanyahu vowed to retaliate against Iran after the Islamic Republic fired scores of ballistic missiles at Israel on Tuesday. Oil traders are concerned the latest escalation could hit flows if energy facilities are attacked or supply routes blocked, which boosts the WTI price.
According to Citigroup, a major attack by Israel on Iran's oil-exporting capabilities might remove 1.5 million barrels per day from the market. “This fresh escalation is serious and justifies oil’s jump,” said Bill Farren-Price, a veteran oil market watcher and senior research fellow at the Oxford Institute for Energy Studies.
Nonetheless, a large build in US crude inventories last week might limit the black gold’s gains. According to the Energy Information Administration, crude oil stockpiles in the United States for the week ending September 27 rose by 3.889 million barrels, compared to a fall of 4.471 million barrels in the previous week. The market consensus estimated that stocks would decline by 1.25 million barrels.
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.
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