WTI tumbles below $62.00 amid supply glut fears
- WTI price falls to near $61.85 in Tuesday’s early European session.
- Iraq and Kurdish regional governments reached an agreement with oil firms to resume crude exports via Turkey on Monday.
- Traders will closely monitor the developments surrounding geopolitical risks.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $61.85 during the early European trading hours on Tuesday. The WTI slumps amid heightened concerns over oversupply after Iraq and the Kurdish regional governments have reached a deal to restart an oil pipeline. Oil traders brace for the American Petroleum Institute (API) weekly crude oil stock report, which will be released later on Tuesday.
WTI price extends the downside as a preliminary agreement reached between Iraq's federal and Kurdish regional governments to restart an oil pipeline added to oversupply concerns. "The prevailing theme is still concerns on oversupply, while demand outlook is still uncertain as we approach year-end period. The restart of KRG pipeline has also been putting pressure on prices," said LSEG senior analyst Anh Pham.
Reuters reported on Monday that Iraq, the Organization of the Petroleum Exporting Countries' (OPEC) second-largest producer, has increased oil exports under an OPEC+ agreement. It also estimates September's exports to range from 3.4 million to 3.45 million barrels per day (bpd).
On the other hand, ongoing geopolitical tensions in the Middle East and Russia might help limit the WTI’s losses. On Monday, NATO allies accused Russia of violating airspace in Estonia and Poland. Britain warned that this may lead to an armed conflict in the area. On the Middle East front, Reuters reported that two Gaza hospitals have been closed owing to Israel's expansion of its ground attack.
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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