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- WTI edges lower to near $74.00 despite supply concerns due to Middle East tensions
WTI edges lower to near $74.00 despite supply concerns due to Middle East tensions
- WTI price loses ground despite the rising supply fears over geopolitical tensions.
- Two US intelligence officials said that Iran and its allies are preparing potential retaliation against Israel.
- EIA Crude Oil Stocks Change fell by 3.728 million barrels, marking the sixth consecutive weekly decline.
West Texas Intermediate (WTI) Oil retraces its recent gains from the previous session, trading around $74.00 during the early European hours on Thursday. However, crude Oil prices may regain support from rising concerns about supply constraints due to ongoing geopolitical tensions in the Middle East.
CNN reported two US intelligence officials, saying that Iran and its allies are preparing for potential retaliation against Israel in response to the recent killings of a top military commander of Iran’s Hezbollah in Lebanon and a senior Hamas leader in Tehran.
On Wednesday, Oil prices appreciated due to a larger-than-expected drop in US crude Oil inventories. Energy Information Administration (EIA) Crude Oil Stocks Change declined by 3.728 million barrels for the week ending August 2, marking the sixth consecutive weekly decline. The stockpiles significantly exceeded the anticipated decrease of 0.4 million barrels and the previous decline was 3.436 billion barrels.
On Tuesday, Reuters reported that the EIA estimates global oil inventories decreased by approximately 400,000 barrels per day (bpd) in the first half of 2024. The EIA projects stockpiles will decline by around 800,000 bpd in the second half of the year.
The US Federal Reserve (Fed) is expected to implement a more aggressive rate cut starting in September, following weaker July employment data that has raised concerns about a potential US recession. Lower interest rates could stimulate growth in the US economy, the world’s largest Oil consumer, potentially increasing Oil demand.
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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