WTI declines as US, Iran avoids further escalation, rising OPEC+ output
- WTI dropped as the US and Iran are currently avoiding further military escalation.
- Iran refused to surrender enriched nuclear material and demanded lifted sanctions and an ended blockade before reopening Hormuz.
- OPEC+ October output jumped by 2.04 million barrels daily to 41.23 million, led by Saudi Arabia despite disruptions.
West Texas Intermediate (WTI) oil price extends it losses for the fifth consecutive day, trading around $85.00 per barrel during Asian hours on Thursday. Crude oil prices have declined as the United States (US) and Iran remain deadlocked in negotiations, though both sides are currently avoiding further escalation.
While Washington insists that nuclear issues must be part of any initial talks aimed at ending their war, a senior Iranian security official rejected this key condition, stating that Tehran would not allow a single atom of its enriched nuclear material to leave the country. Iran has also reiterated that the US must lift its sanctions and end the naval blockade before the Strait of Hormuz can be reopened.
OPEC+, which includes the Organization of the Petroleum Exporting Countries and allies such as Russia, crude oil production jumped in October. According to OPEC's monthly report released on Wednesday, the alliance pumped 41.23 million barrels per day in October. This marks an increase of about 2.04 million barrels per day from September, led primarily by a sharp rise in output from Saudi Arabia.
Oil risk stays elevated as US–Iran tensions threaten further escalation
Analysts at Rabobank caution that the geopolitical backdrop around Oil remains highly unsettled, noting that “presuming this was achieved last weekend, where other reports suggest the US was moments away from striking, that means we could still be looking at more fighting by mid- to end-November, at which time a third US aircraft carrier will be in the region.” They characterise this potential timeline and build-up of US military assets as “a distressing report,” underscoring that markets cannot yet discount the risk of renewed escalation in US–Iran tensions.
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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