WTI recovers above $71.00 on supply disruptions in the Caspian region
- WTI price rebounds to near $71.20 in Tuesday’s early Asian session.
- An attack on an oil pipeline pumping station in the Caspian Sea slowed flows from Kazakhstan, supporting the WTI price.
- The potential ceasefire talks in the Russia-Ukraine war and trade war tension could drag the WTI lower.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $71.20 during the early Asian session on Tuesday. The WTI price recovers amid supply disruptions in the Caspian region.
The Caspian Pipeline Consortium said on Monday that drones struck the Kropotkinskaya pipeline pumping station in Russia's southern Krasnodar region, reducing oil flows from Kazakhstan to world markets by Western producers. This, in turn, provides some support to the WTI price.
"Although those drone attacks so far had limited disruption impacts on Russian crude exports, the rising frequency of those attacks is a concern that at some point it triggers some supply risks," said UBS analyst Giovanni Staunovo.
Investors will closely watch the developments surrounding a possible Moscow-Kiev ceasefire agreement that could ease sanctions and increase global supplies. The potential ceasefire talks in the Russia-Ukraine war might cap the upside for the black gold in the near term.
Additionally, the prospect of a global trade war might weigh on the WTI. Last week, US President Donald Trump ordered his administration to consider imposing reciprocal tariffs on numerous trading partners.
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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