WTI holds below $73.50 as Middle East tensions ease
- WTI attracts some sellers near $73.35 in Wednesday’s early Asian session.
- The possible Hezbollah-Israel ceasefire, ongoing concerns about China’s demand could undermine the WTI price.
- The rising Middle East geopolitical risks might cap the upside for WTI.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $73.35 on Wednesday. The WTI price edges lower on the report of a possible ceasefire between Hezbollah and Israel. However, the fears of a potential attack on Iranian oil infrastructure might cap its downside.
Investors have reduced their war-risk bets as the lack of further escalation alleviated fears of oil supply disruption in the Middle East. This, in turn, weighs on the WTI price on the day. Israel Defence Minister Yoav Gallant will meet with US Secretary of Defence Lloyd Austin at the Pentagon on Wednesday to discuss security developments in the Middle East.
Meanwhile, the development surrounding geopolitical tension in the region will be closely watched. The fears that Israel might be targeting Iran's oil industry in retaliation for Tehran's ballistic missile attack could lift the black gold price.
US crude oil inventories rose more than expected last week. According to the American Petroleum Institute (API), crude oil stockpiles in the United States for the week ending October 4 rose by 10.9 million barrels, compared to a fall of 1.5 million barrels in the previous week. The market consensus estimated that stocks would increase by only 1.95 million barrels.
The disappointment that Chinese officials did not announce any new stimulus measures at a press briefing Tuesday contributes to the WTI’s downside as China is the world’s largest crude importer. “Ongoing concerns about China’s demand persist due to the lack of stimulus, while the Middle East conflict has not led to any supply disruptions,” said Svetlana Tretyakova, senior oil market analyst at Rystad Energy.
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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