WTI rises above $97.50 due to drone attacks on Saudi, Russia
- Drone strikes on Saudi and Russian oil facilities raised immediate energy supply disruption concerns.
- Ukraine's drone attacks on Russian oil infrastructure signal Kyiv’s intent to disrupt Moscow’s diesel exports under Trump and Putin's agreement.
- Oil price gains may be capped by rising Middle Eastern exports and upcoming Russian diesel deliveries.
West Texas Intermediate (WTI) oil price halts its three-day losing streak, trading around $97.70 during Asian hours on Thursday. Crude oil prices climbed following a drone attack on Saudi Aramco’s Shaybah oil field that resulted in two casualties. The incident has intensified geopolitical tensions in the Middle East and amplified concerns regarding potential energy supply disruptions. In response to the heightened safety risks, the United States (US) has ordered select personnel and family members to evacuate American embassies in Saudi Arabia.
Meanwhile, geopolitical conflicts elsewhere continue to impact global energy markets. Ukraine launched large-scale drone attacks targeting Russia's critical oil infrastructure this week. This move signals Kyiv’s active intention to disrupt Moscow's ability to expand diesel exports under a recent agreement between Presidents Trump and Putin.
Despite these supply threat concerns, further gains in oil prices could be limited by expanding supply from key producers. Middle Eastern export flows are nearing prewar levels, highlighted by a 7.9% increase in Saudi Arabia's crude exports in August, their highest level since March. Additionally, global market supplies are set to increase further as Russia is expected to deliver its first diesel shipment to the United States on Thursday.
Strategists at Brown Brothers Harriman note that Brent crude oil prices are "holding on to recent gains near $110 a barrel," even as broader markets continue to adjust. They point out that "bond yields are edging higher while stocks are extending their recovery," with particular attention on Europe, where the "French 10-year bond yield premium over Germany is closing in on a 24-year high." In the currency space, BBH observes that the "USD is mixed just above yesterday’s lows, with interest rate differentials supportive of the currency." Against this backdrop, Rabobank argues that the "full-fat Pax Americana being over portends more Middle East instability ahead," reinforcing the notion that the evolving geopolitical landscape could sustain a higher risk premium across Oil-linked assets.
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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