WTI Oil hesitates above $63.00 with geopolitics on the spotlight
- WTI Crude has ticked down to the $63.00 area on Tuesday, from $63.70 highs on Monday.
- Oil prices remain trading in a range, with all eyes on the US-Iran nuclear talks.
- Rumours of further output hikes by OPEC+ countries are acting as headwinds for Oil rallies.
Crude Oil prices are ticking lower in quiet markets on Tuesday, but remain steady within February’s trading range with all eyes on the US-Iran talks. The US Benchmark WTI has pulled back from Monday’s highs at $63.70 but remains above $63.00 at the time of writing.
With most Asian markets closed for the Lunar New Year and the US coming from a long weekend, trading volumes remain subdued. Investors await the outcome of the conversations between Washington and Tehran, which will resume in Geneva later on Tuesday.
The US President Donald Trump said earlier on Tuesday that he will be involved “indirectly” in the talks with Iran, and affirmed that the Islamic Republic’s authorities were motivated to negotiate this time.
The Iranian Foreign Minister affirmed earlier on the day that the US position on the nuclear Issue has moved towards a “more realistic one”. The stakes, however, are high. The US has deployed aircraft carriers to the Arabian Sea, making clear that military action is on the table.
Meanwhile, Reuters reported over the weekend that the OPEC+ countries would be considering resuming output hikes from April, bracing for an increment of global demand during the western summer season. This is keeping a lid on Oil rallies.
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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