West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $60.35 during the Asian trading hours on Thursday. The WTI price edges higher amid persistent tensions in Iran. Traders will closely monitor the latest geopolitical developments surrounding the Iranian civil unrest.
US President Donald Trump had previously threatened to take “very strong action” against the Islamic Republic if it executes protestors. Bloomberg reported on Wednesday that the US moved military staff, and the Iranian government warned neighboring countries against assisting an attack. Fears of US military action against Iran and concerns over a possible oil production disruption in Iran could boost the WTI price in the near term.
On the other hand, any signs of easing tensions in Iran might cap the downside for the WTI price. Trump said early Thursday that Iran has “no plan for executions,” amid fears for the fate of a detained anti-government protester. However, Trump declined to take military action off the table, saying his administration will wait and see.
US crude inventories are experiencing a large build in US crude inventories. According to the Energy Information Administration (EIA) weekly report, crude oil stockpiles in the US for the week ending January 14 rose by 3.391 million barrels, compared to a fall of 3.831 million barrels in the previous week. The market consensus estimated that stocks would decline by 2.2 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.
