WTI remains above $69.00 due to growing supply concerns over the Russia-Ukraine conflict
- WTI price receives support from growing supply concerns due to rising geopolitical tensions.
- Kremlin warned to retaliate if Ukraine use Army Tactical Missile Systems (ATACMS).
- Norway’s Equinor announced a production halt at its Johan Sverdrup Oilfield due to an onshore power outage.
West Texas Intermediate (WTI) Oil price extends its gains for the second successive session, trading around $69.20 per barrel during Asian hours on Tuesday. Crude Oil prices have gained support amid growing supply concerns over a potential escalation in the Russia-Ukraine conflict. On Sunday, Russia launched its largest airstrike on Ukraine in nearly three months, inflicting significant damage on the country's power infrastructure.
On Sunday, US President Joe Biden authorized Ukraine to use Army Tactical Missile Systems (ATACMS), advanced long-range American weapons, to conduct strikes within Russia. CNN cited two US officials.
In response, the Kremlin warned on Monday that it would retaliate against what it described as a reckless move by the Biden administration. Russia had previously cautioned that such actions could heighten the risk of confrontation with NATO.
Crude Oil prices found support after Norway’s Equinor announced a production halt at its Johan Sverdrup Oilfield, the largest in Western Europe, due to an onshore power outage. According to the company on Monday, efforts to restore production are underway, but a timeline for resumption remains uncertain, as reported by Reuters.
Last week, crude Oil prices faced downward pressure after Federal Reserve Chair Jerome Powell tempered expectations for near-term rate cuts, emphasizing the economy’s resilience, a robust labor market, and persistent inflationary challenges. Adding to the bearish sentiment, concerns about weakening demand in China, the world’s largest Oil importer, have further weighed on the Oil prices.
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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