WTI edges higher to near $63.50 amid global geopolitical risks
- WTI price rises to near $63.50 in Thursday’s early Asian session.
- Geopolitical tension mounts as Poland shoots down drones.
- Crude inventories rose by 3.9 million barrels in the week to September 5, EIA said.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $63.50 during the early Asian trading hours on Thursday. The WTI trades in positive territory for the third consecutive day amid global geopolitical risks.
Rising geopolitical tensions in Europe and the Middle East provide some support to the black gold. Geopolitical risks in Europe rose after Poland shot down Russian drones that crossed into its territory in Russia's latest attacks on Ukraine. On the Middle East front, Israel on Tuesday launched a strike on Doha, Qatar, targeting the senior leadership of Hamas. Qatar said the attack by Israel violated international law and threatens to widen the conflict in the region, the source of about one-third of global oil supplies.
Crude inventories unexpectedly rose last week, indicating weaker demand and might cap the upside for the WTI price. Data released by the Energy Information Administration (EIA) on Wednesday showed that crude oil stockpiles in the US for the week ending September 5 climbed by 3.939 million barrels, compared to a rise of 2.415 million barrels in the previous week. The market consensus estimated that stocks would decline by 1.1 million barrels.
Furthermore, the US Energy Information Administration (EIA) stated on Tuesday that it expects global crude prices to remain under significant pressure in the months ahead due to rising inventories by OPEC+, the Organization of the Petroleum Exporting Countries, and its allies, including Russia. This, in turn, might also undermine the WTI price in the near term.
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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