West Texas Intermediate (WTI) Crude Oil prices catch aggressive bids during the Asian session on Thursday and surge past the $97.00 mark as US President Donald Trump’s prime-time address gets underway. The commodity now seems to have snapped a two-day losing streak to a one-week low, around mid-$92.00s, touched the previous day.
Trump reiterated the 2-3 week timeline and also threatened to hit Iran’s energy infrastructure if no deal is reached. This comes on top of the Wall Street Journal’s report on Tuesday that the United Arab Emirates (UAE) is pushing for military action to reopen the Strait of Hormuz and is lobbying for a UN Security Council resolution to authorize such an operation.
Moreover, the US is heavily reinforcing the Middle East with thousands of troops, marking the largest military buildup in two decades. This raises the risk of a further escalation of ongoing conflicts in the world’s premier oil-producing region and backs the case for a further appreciating move for the black liquid, back closer to a multi-week top set on Tuesday.
Meanwhile, the latest leg up in revives inflationary concerns, bolstering bets for an interest rate hike by the US Federal Reserve (Fed). Apart from this, a fresh wave of the global risk-aversion trade benefits the US Dollar’s (USD) status as the global reserve currency, which tends to undermine USD-denominated commodities, and might keep a lid on Crude 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.
