WTI declines below $79.00 as prospects improve for a Gaza ceasefire
- WTI price loses ground to near $78.85 in Thursday’s Asian session.
- Israel and Hamas agreed to a ceasefire deal, weighing on the WTI price.
- US crude oil inventories declined by 1.962 million barrels last week, according to the EIA.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $78.85 on Thursday. The WTI price edges lower as improved prospects for a ceasefire between Hamas and Israel could ease geopolitical tensions in the Middle East, which weigh on the WTI price.
According to an official, Israel and Hamas agreed to a deal to halt fighting in Gaza and exchange Israeli hostages for Palestinian prisoners. An ending of conflicts between Israel and Hamas will ease tensions in the Middle East and reduce the threats of disruption to crude supplies in the region. This, in turn, could undermine the black gold price.
However, US crude oil stockpiles extend decline, which might cap the downside for the WTI price. The US Energy Information Administration weekly report showed crude oil stockpiles in the United States for the week ending January 10 decreased by 1.962 million barrels, compared to a decline of 959K barrels in the previous week. The market consensus estimated that stocks would fall by 1.6 million barrels.
Oil traders await the release of US Retail Sales for December and weekly Initial Jobless Claims for fresh impetus, which are due later on Thursday. In case of a weaker-than-expected outcome, this could drag the Greenback lower and lift the USD-denominated commodity price.
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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