WTI drifts lower to near $58.50 on Iraq oilfield recovery
- WTI price loses ground to near $58.65 in Tuesday’s early Asian session.
- Iraq restores production at the West Qurna 2 oilfield.
- Fed rate cut expectations and slow progress on Ukraine peace talks might cap the WTI’s losses.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $58.65 during the Asian trading hours on Tuesday. The WTI price edges lower as Iraq restores production at one of its oilfields. Traders await the release of the American Petroleum Institute (API) crude oil stockpiles report later on Tuesday.
Reuters reported on Monday that Iraq resumed production at Lukoil’s West Qurna 2 oilfield after a leak on an export pipeline slashed its output. The field, which produces over 460,000 barrels per day, accounts for about 0.5% of the world's oil supply and 9% of total output in Iraq, OPEC's second-largest producer after Saudi Arabia.
On the other hand, geopolitical risks could provide some support to the WTI price. US President Donald Trump said he was disappointed in Ukrainian President Volodymyr Zelenskiy’s handling of a US proposal to end the nearly four-year-old war. Analysts expect the restrictions on Russian energy exports to remain, following Zelenskiy's statement that there is no accord yet to end the Russian-Ukrainian war.
Oil traders await the US Federal Reserve (Fed) interest rate decision on Wednesday, which is anticipated to deliver a quarter-point rate cut at its December meeting. Rising Fed rate cut bets could strengthen the outlook for higher energy demand in 2025 and underpin the black gold. Lower interest rates generally drag the US Dollar (USD) lower and boost the WTI price, as it makes USD-denominated commodities cheaper for foreign buyers.
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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