West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $59.10 during the Asian trading hours on Friday. The WTI price recovers some lost ground, snapping the two-day losing streak, as traders assess the geopolitical situation in the Middle East.
US President Donald Trump said early Thursday that Iran has “no plan for executions,” amid fears for the fate of a detained anti-government protester. Nonetheless, Trump hasn’t taken any options off the table, saying that there will be “grave consequences” if killings continue.
Reuters reported late Thursday that the US military is moving a carrier strike group to the Middle East region amid the ongoing tension. Traders will closely monitor the latest geopolitical developments surrounding the Iranian civil unrest. Any signs of rising tensions in Iran could boost the WTI price, as Iran is the third-largest crude oil producer within OPEC.
Daniel Takieddine, co-founder and CEO of Sky Links Capital Group, said that geopolitical risk has not disappeared despite a softer tone from Trump. “Tensions across major producing regions remain elevated, and developments in Eastern Europe and Latin America continue to inject uncertainty into energy supply chains,” said Takieddine.
The potential upside for the WTI price might be limited amid supply glut concerns. On Wednesday, the US Energy Information Administration (EIA) reported larger-than-expected builds in crude oil, raising worries about weak demand and oversupply.
According to the 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.
