WTI under pressure as US stockpiles jump, OPEC+ signals supply increase
- WTI trades lower on Wednesday as renewed oversupply concerns weigh on prices.
- OPEC+ expected to consider modest output increase at March 1 meeting.
- US-Iran nuclear talks in focus as geopolitical risks cap downside.
West Texas Intermediate (WTI) trades under pressure on Wednesday as a larger-than-expected US crude inventory build and expectations of higher OPEC+ output fuel renewed oversupply worries. At the time of writing, the US benchmark is trading around $65.45, down nearly 1.25%.
Fresh data from the US Energy Information Administration (EIA) showed Crude Oil Inventories surged by 15.989 million barrels last week, sharply reversing the prior 9.014 million barrel draw. The increase marked the largest weekly build since February 2023.
The downside also reflects cautious repositioning ahead of the US-Iran nuclear talks scheduled in Geneva on Thursday. Investors are closely monitoring the situation, as a breakdown in negotiations could heighten the risk of US military action amid a significant buildup of American forces in the region.
Any escalation could disrupt supply through the Strait of Hormuz and push WTI higher, adding a fresh geopolitical risk premium to markets. Earlier in the day, US President Donald Trump said during his State of the Union address that his preference is to resolve the Iran nuclear issue through diplomacy.
Meanwhile, Iran’s Deputy Foreign Minister Abbas Araghchi said on Tuesday that Tehran is ready to take the necessary steps to reach an agreement with the US.
A Reuters report published earlier on Wednesday said Saudi Arabia is ramping up oil production and exports as a precautionary measure in case a potential US strike on Iran disrupts Middle Eastern supply flows, citing two sources familiar with the plan.
In a separate development, OPEC+ delegates expect the group to resume modest supply increases at its March 1 meeting. According to Reuters, three sources familiar with the matter said the alliance is likely to consider raising output by about 137,000 barrels per day in April.
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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