WTI finds resistance near $71.00, upside remains likely due to escalating supply concerns
- WTI may regain its ground due to rising geopolitical tensions involving major Oil producers, Russia and Iran.
- Iran took measures such as activating advanced centrifuges for uranium enrichment following a resolution passed by the UN atomic watchdog.
- Oil prices gained further support from increased demand in two of the world’s largest Oil importers, China and India.
West Texas Intermediate (WTI) crude Oil price pauses its two-day rally, trading around $70.80 per barrel during Asian trading hours on Monday. However, downside risks to Oil prices remain limited due to escalating geopolitical tensions involving major Oil producers, Russia and Iran, which have sparked concerns over potential supply disruptions.
Last week, Oil prices edged higher as geopolitical tensions intensified following Ukraine's first attack on Russia using US and British weapons. In response, Russia launched a newly developed hypersonic ballistic missile. “The recent exchanges indicate the war has entered a new and dangerous phase, raising concerns of disruptions to supplies,” analysts at ANZ, led by Daniel Hynes, stated in a note, according to Reuters.
On Thursday, Iran responded to a resolution passed by the UN atomic watchdog by initiating measures such as activating advanced centrifuges for uranium enrichment. The UN nuclear watchdog's 35-nation Board of Governors had passed the resolution, urging Iran to enhance cooperation with the agency and requesting a "comprehensive" report to press Iran into renewed nuclear negotiations.
Meanwhile, Oil prices received additional support from rising demand in two of the world’s largest Oil importers, China and India. China’s crude imports rebounded in November as lower prices encouraged stockpiling, while Indian refiners boosted crude throughput by 3% year-over-year to 5.04 million barrels per day (bpd) in October, driven by strong fuel export activity.
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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