- WTI price jumps to near $63.20 in Monday’s early Asian session.
- Geopolitical risks in Europe and the Middle East boost the WTI price.
- Persistent oversupply and soft fuel demand in the US might cap the upside for the WTI.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $63.20 during the early Asian trading hours on Friday. The WTI rises amid escalating geopolitical tension in Europe and the Middle East. Oil traders brace for the American Petroleum Institute (API) weekly crude oil stock report later on Tuesday.
Reuters reported that Polish and allied aircraft were sent on Saturday to protect Polish airspace after Russia attacked western Ukraine near the Polish border, according to the NATO-member country's military. "Reports over the weekend that Russia was threatening over the Polish border have provided traders with a timely reminder of the ongoing risks to European energy security from the northeast," said Michael McCarthy, CEO of investment platform Moomoo Australia and New Zealand.
The US Federal Reserve (Fed) last week approved a widely anticipated rate cut and signaled that two more reductions are on the way before the end of the year. Lower interest rates generally support oil demand, and the Fed’s guidance suggests it now views risks from rising unemployment as outweighing those from persistent inflation.
On the other hand, the prospect of more oil supply and concerns over a slowdown in the US economy could weigh on the WTI price. US crude oil stockpiles fell sharply last week as net imports dropped to a record low while exports jumped to a near two-year high, according to the Energy Information Administration (EIA). However, a rise in distillate stockpiles, which increased by 4 million barrels versus predictions of a 1 million barrel increase, raised worries about demand in the world's top oil consumer.
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.
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