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- WTI price holds position around $75.50 due to rising fears of Oil supply
WTI price holds position around $75.50 due to rising fears of Oil supply
- WTI price tends to advance due to rising supply concerns in the Middle East.
- Libya's Oil exports were halted at several ports due to a standoff between rival political factions.
- Iraq plans to reduce its Oil output to between 3.85 million and 3.9 million barrels per day beginning next month.
The West Texas Intermediate (WTI) Oil price continues to rise, trading around $75.50 per barrel during Friday's Asian session. This increase is driven by supply concerns in the Middle East. Worries about reduced Libyan Oil supplies and Iraq's plans to curb production are contributing to these supply fears, which in turn are bolstering Oil prices.
On Thursday, over half of Libya's Oil production, roughly 700,000 barrels per day (bpd), was offline, and exports were suspended at several ports due to a standoff between rival political factions. According to Rapidan Energy Group, as reported by Reuters, Libya's production losses could escalate to between 900,000 and 1 million bpd and potentially persist for several weeks.
In addition, Iraqi Oil supplies are anticipated to decline as the country has exceeded its quota set by the Organization of the Petroleum Exporting Countries (OPEC) and its allies. According to a source with direct knowledge, Iraq plans to cut its Oil output to between 3.85 million and 3.9 million barrels per day (bpd) starting next month, as reported by Reuters on Thursday.
Nevertheless, the rise in WTI prices might be limited by weakened global demand for crude Oil. Persistent concerns about China's economy, the world's largest Oil importer, continue to dampen Oil demand. On the other hand, the US economy has shown modest growth, which has positively impacted investor confidence. In the second quarter, the US Gross Domestic Product (GDP) grew at an annualized rate of 3.0%, surpassing both the forecasted and previous growth rate of 2.8%.
WTI prices may find support from the growing likelihood of an interest rate cut by the Federal Reserve starting in September. On Thursday, Federal Reserve Atlanta President Raphael Bostic, known for his hawkish stance on the Federal Open Market Committee (FOMC), suggested it might be "time to move" on rate cuts. This indication comes in response to further cooling inflation and a higher-than-expected unemployment rate.
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 13 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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