WTI nears $73.00 with Middle East tensions keeping downside attempts limited
- Oil prices surge to two-month highs after Israel's attack on Iran.
- The closure of the Strait of Hormuz might bring Crude prices well above $100.
- US WTI prices have appreciated more than 7% today, reaching levels near $73.00.
Oil prices have rallied beyond 7% so far today, boosted by growing concerns of a full-blown war in the Middle East that would ignite an already volatile region and cause a severe disruption in global Oil supply.
Israel attacked Iran with unprecedented strength earlier today, hitting key nuclear sites and killing high-ranking Revolutionary Guard Officials. Iran responded with drone attacks and pulled out of the nuclear talks with the US.
Oul rallies on concerns of a full-blown Israel-Iran war
Crude prices skyrocketed after the news, with all eyes turning to the strategic Strait of Hormuz route, which carries about 20% of the global Oil supply and whose closure might push the price of the barrel up to the $120-130 area, according to market sources.
The US benchmark West Texas Intermediate (WTI) surged more than $5 so far today, jumping from $67.75 to the $72.90 area at the moment of writing. Downside attempts are being contained above the $70.00 psychological level.
Data released by the US Energy Information Administration (EIA) on Wednesday revealed that US Oil stocks declined by 3.6 million barrels in the first week of June, against market expectations of a 100K buildup. The data highlights strong demand and increased support for prices.
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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