WTI rises above $94.00 as Middle East turmoil escalates
- WTI price climbs to near $94.20 in Tuesday’s early Asian session.
- Escalating tensions in the Middle East continue to boost the WTI price.
- The IEA will consider the release of more oil reserves to curb the economic impact of the US-Israel war with Iran.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $94.20 during the early Asian trading hours on Tuesday. The WTI price rises as the Iran war shows no signs of ending soon. Traders await the release of the American Petroleum Institute (API) report, which will be published later on Tuesday.
The Israeli military said on Tuesday that it had detected missiles launched from Iran heading towards Israeli territory. It urged people in affected areas to head to shelters immediately. The United Arab Emirates (UAE) announced the temporary and full closure of the country’s airspace as “an exceptional precautionary measure.” UAE’s defense ministry said earlier it was responding to incoming missile and drone threats from Iran.
Retaliatory Iranian attacks across the region on ships, infrastructure, and ports through which oil tankers transit raise fears that the war would turn into a protracted regional conflict. This, in turn, could boost the WTI price in the near term.
On the other hand, the International Energy Agency (IEA) will consider the release of more oil reserves into the global market to cool rising oil prices. The IEA said that it will release a record 400 million barrels of oil. The release of emergency oil reserves by countries coordinated through the IEA can add temporary supply to the market and prevent a sharp spike in 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.
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