WTI remains above $62.50 following news of Israel planning to hit Iranian nuclear sites
- WTI price rose due to rising supply concerns following the news of Israel planning to strike nuclear facilities in Iran.
- Iran may block the waterways through the Strait of Hormuz, raising concerns for Oil flow from major Gulf countries.
- API Weekly Crude Oil Stock increased by 2.49 million barrels last week, defying expectations of a 1.85 million-barrel draw.
West Texas Intermediate (WTI) Oil price extends its gains for the fourth successive session, trading around $62.70 per barrel during the early European hours on Wednesday. Crude Oil prices surge following the news of Israel planning to strike nuclear facilities in Iran, which could destabilize the Oil supply from the Middle East region. However, CNN cited officials saying it was not clear that Israeli leaders had made a final decision.
An Israeli attack could upset flows from Iran, the third-largest Oil-producing country among the members of the Organization of the Petroleum Exporting Countries (OPEC). Oil prices rise as supply concerns increase if Iran may retaliate and block the waterways through the Strait of Hormuz, raising concerns for crude Oil exports from major Gulf countries like Saudi Arabia, Kuwait, Iraq, and the United Arab Emirates.
The upside of the Oil prices could be restrained due to improving crude supply in the United States (US), the world's biggest Oil consumer. American Petroleum Institute (API) Weekly Crude Oil Stock rose by 2.49 million barrels in the previous week, lower than the previous increase of 4.28 million-barrel increase the week before, but against the expected 1.85 million-barrel draw. Investors are looking ahead to the crude Oil Stocks Change from the Energy Information Administration (EIA) later on Wednesday.
Moreover, the Oil production in Kazakhstan has increased by 2% in May, following a decline of 3% in April, although it still exceeded its OPEC+ quota. This increase has defied pressure from OPEC+ on the country to reduce its output. The Kazakh energy ministry avoided responding to a request to comment on production figures.
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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