WTI Oil stabilizes as US-Iran tensions offset by record US Crude inventory build
- WTI US Oil trades near flat as US-Iran tensions keep a geopolitical risk premium in place.
- Investors await the third round of nuclear negotiations scheduled in Geneva on Thursday.
- US weekly Crude inventories surge by nearly 16 million barrels, marking the largest build since February 2023.
West Texas Intermediate (WTI) US Oil trades around $65.40 per barrel on Thursday at the time of writing, little changed on the day, after two consecutive days of losses. Crude Oil prices stabilize as markets assess the balance between geopolitical risks in the Middle East and signals of excess supply in the United States (US).
Attention is focused on the third round of nuclear talks between the US and Iran, held in Geneva. US President Donald Trump recently raised the possibility of military action if negotiations fail, while Tehran warned that US military bases in the Middle East could become legitimate targets in the event of escalation. This backdrop maintains a geopolitical risk premium embedded in prices, as traders fear potential disruptions to global supply.
According to Reuters, analysts at ING Group note that the outcome of these talks will be decisive for price action. A constructive agreement could lead to a gradual unwinding of a geopolitical premium estimated at around $10 per barrel currently priced into the market. Conversely, any sign of escalation could revive supply disruption concerns and support prices in the near term.
However, upside potential remains capped by heavier fundamentals. Data released by the Energy Information Administration (EIA) showed that US Crude inventories increased by 15.989 million barrels last week, following a 9.014 million barrel draw the previous week. This marks the largest weekly build since February 2023 and revives concerns about ample supply.
In addition, Saudi Arabia is approaching its highest Crude Oil export levels in nearly three years, while Iran is also accelerating tanker loadings. Meanwhile, the US Department of the Treasury announced that it would authorize companies to apply for licenses to resell Venezuelan Oil to Cuba’s private sector, a move that could increase available supply on the international market.
In this mixed environment, the Oil market swings between geopolitical tensions that could tighten supply and concrete indicators of short-term surplus. Developments from the Washington-Tehran talks could therefore provide clearer direction for WTI in the coming days.
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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