WTI remains below $97.50 as Saudi routes recover, US stocks shrink less than expected
- WTI falls as Saudi Arabia plans to partially restore its damaged East-West pipeline within days and fully within six weeks.
- US military assistance enabled 18 million barrels of crude and petroleum products to clear the Strait of Hormuz.
- EIA Crude Oil Stocks fell by only 640,000 barrels, well below the expected 1.62 million-barrel draw.
West Texas Intermediate (WTI) oil price extends its losses for the second successive day, trading around $96.60 per barrel during the Asian hours on Thursday. Crude oil prices fall following reports that Saudi Arabia plans to restore roughly half the capacity of its East-West pipeline within days and achieve full operation within six weeks. The vital pipeline, which provides an alternative export route around the vulnerable Strait of Hormuz, suffered damage during drone attacks last week.
Meanwhile, Saudi Arabia has stepped up efforts to transport larger volumes of crude through Hormuz with assistance from the US military. Further easing supply concerns, US Energy Secretary Chris Wright confirmed that 18 million barrels of crude and petroleum products successfully passed through the Strait of Hormuz earlier this week.
Adding to the downward pressure on prices, the US Energy Information Administration (EIA) reported a smaller-than-expected draw from domestic crude inventories for the previous week.
EIA data showed that crude oil stocks in the top-producing nation fell by approximately 640,000 barrels. This drop was significantly lower than the 1.62 million-barrel draw energy analysts had anticipated in a Reuters poll, signaling softer demand or higher supply buffers than market expectations had priced in.
Middle East posture seen keeping oil’s geopolitical premium elevated
According to TD Securities, the configuration of US policy and military engagement in the region will be critical for crude markets. The bank argues that “a less aggressive or supportive military presence in the Middle East would see an elevated geopolitical risk premium remain in markets,” as Iran would likely seek to “consolidate control over the Strait,” reinforcing the potential for persistent supply-side anxiety in Oil.
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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