WTI drifts higher to near $89.50 as US launches renewed strikes against Iran
- WTI price gains ground to near $89.50 in Thursday’s early European session.
- US strikes in Iran raise fears of extended disruption to energy flows.
- US crude inventories fell by 7.228 million barrels in the week ended June 5.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $89.50 during the early European trading hours on Thursday. The WTI price edges higher amid renewed skirmishes between the United States (US) and Iran.
The US launched a fresh round of military strikes against Iran, stoking worries that the Iran war could disrupt energy supplies for longer. This, in turn, could boost the WTI price in the near term. The US Central Command (CENTCOM) said American forces had started “launching additional self-defense strikes against multiple targets in Iran at the commander in chief's direction.” The military added that the operation was carried out “in response to Iran’s unwarranted and continued aggression.”
On Thursday, Bahrain, Jordan and Kuwait reportedly intercepted Iranian missiles and drones aimed at US military facilities, wider regional involvement in the conflict, Reuters reported.
US crude oil inventories continued their downward plunge last week. According to the US Energy Information Administration (EIA) report, crude oil stockpiles in the US for the week ending June 5 declined by 7.228 million barrels, compared to a decline of 7.974 million barrels in the previous week. The market consensus was for 4.0 million barrels.
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
