WTI gains ground above $76.50 amid fears of Middle East oil production disruptions
- WTI price extends upside near $76.85 in Tuesday’s early Asian session.
- Fears of wider Middle East conflict boost the WTI price.
- Investors await additional stimulus measures from Chinese officials.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $76.85 on Thursday. The WTI price extends the rally as escalating geopolitical tensions in the Middle East raised speculation that Israel may attack Iran’s oil infrastructure.
Oil prices soared on fears that Israel might be targeting Iran's oil industry in retaliation for Tehran's ballistic missile attack. Iran-backed Hezbollah launched rockets toward Israel's third-largest city, Haifa, early Monday. On the first anniversary of the Gaza war, Israel planned to ramp up ground incursions into southern Lebanon, causing the fear of wider war in the region, per Reuters.
"There is growing concerned that (the) conflict may continue to escalate - not only putting Iran's 3.4 mmbopd (million barrels of oil per day) of production at risk - but creating further disruptions to regional supply," noted analysts at Tudor, Pickering, Holt & Co.
Sluggish Chinese demand and dismal global economic data have dampened the outlook for oil markets this year. However, investors will closely watch additional policy measures from China’s top economic planning body on Tuesday after mainland China markets return from a week-long holiday. The lack of fresh measures or a smaller-than-expected package could also disappoint the market and weigh on the WTI price.
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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