WTI Oil struggles below $70 amid expectations of higher Middle East supply
- WTI Oil has dropped $8 this week, reaching levels below $70 from the first time since Iran's war started.
- Investors foresee an increase in Middle East supply as tankers flow through the Strait of Hormuz.
- US Energy Secretary Chris Wright also affirmed that Venezuelan Oil production is increasing fast.
Crude Oil prices edge lower on Friday, with the US benchmark West Texas Intermediate (WTI) barrel changing hands at $69.65 at the time of writing. This is the lowest price since February 27, one day before the US and Israel launched a joint attack on Iran.
WTI prices have extended their sell-off this week, posting more than a 30% decline since late May, as a partial reopening of the key Strait of Hormuz and market expectations of increased supply from Middle Eastern countries are offsetting concerns about higher demand as the western holiday season starts.
The US Energy Secretary, Chris Wright, affirmed earlier this week that Crude Oil flows through the Strait of Hormuz have returned to pre-war levels, with about 20 million barrels crossing the key waterway on Wednesday.
Wright also added that Oil exports from Venezuela, which are administered by the US since the capture of former president Nicolas Maduro, have increased significantly and that they might double by the end of US President Donald Trump’s term, in 2029. This has contributed to pushing prices lower.
Regular crude Oil flows are likely to take weeks to return to normal after a nearly three-month-long closure of Hormuz. Investors, however, remain hopeful that the higher supplies from Gulf countries, together with additional supplies from Iran, after the US waived restrictions during the ceasefire, will contribute to a quick replenishment of the depleted global Oil reserves.
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.
Recommended Articles
