WTI falls to near $80.50 on profit-taking, increased traffic through Strait of Hormuz
- WTI slumps to near $80.50 in Friday’s early European session, down 2.60% on the day.
- Signs of increased oil tanker traffic through the Strait of Hormuz and profit-taking drag the WTI price lower.
- Iran’s Parliament Speaker said the US will 'pay the price' for killing Iranian civilians.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $80.50 during the early European trading hours on Friday. WTI tumbles as traders book some profits despite ongoing conflicts in the Middle East.
Profit-taking set in following the previous day's sharp rally. Additionally, shipping through the Strait of Hormuz has picked up in recent days, with the US claiming its navy escorted some tankers across the waterway. Fourteen commodity vessels transited the critical waterway on Wednesday, up from single digits last week, according to Kpler.
However, ongoing hostilities in the Middle East might underpin the black gold. Iranian Parliament Speaker Mohammad Bagher Ghalibaf said on Thursday that the United States (US) will "pay the price" for killing Iranian civilians, per the Guardian.
The Islamic Revolutionary Guard Corps (IRGC) said on Thursday that it targeted US bases in Kuwait, Jordan and Bahrain after US forces bombed a building on Iran’s Qeshm Island. IRGC further stated that the Strait of Hormuz would remain closed and that the “aggressor will be punished.”
US crude oil inventories fell by more than expected last week. According to the US Energy Information Administration (EIA), crude oil stockpiles in the US for the week ending July 24 dropped by 7.167 million barrels, compared to a rise of 2.011 million barrels in the previous week. The market consensus was for a decline of 2.5 million barrels.
OPEC+ seen completing voluntary cut unwind before likely pause
Analysts at ING expect OPEC+ to confirm a further supply increase when the group meets on 2 August, projecting an additional “188k b/d for September.” They note that this move “would see the full unwinding of the 1.65m b/d of voluntary cuts announced back in 2023,” effectively restoring all of the extra curbs that had been in place. However, ING also points to reports suggesting the alliance “will likely pause any further supply increases following the September increase,” signaling a more cautious stance on adding barrels beyond that point.
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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