WTI Oil remains steady near $74.00 as risks of supply disruptions looming
- Oil prices are trading near 11-month highs, at the $74.00 area, with downside attempts finding buyers.
- Fears that the Middle East conflict will lead to a supply disruption keep Crude prices buoyed.
- US has postponed its decision to attack Iran, which is keeping prices from escalating further.
Crude Oil prices keep trading near their highest levels since January, with the barrel of WTI trading at the $74.00 area at the moment of writing. Fears that the Middle East conflict might lead to a severe supply disruption are keeping downside attempts limited.
The bearish rereversal seen on earlier today, after the US postponed its decision to involve in the Israel - Iran war, has been contained at $72.45, and prices are piching up again during the European morning returning to levels close to the $75.00 resistance area, which has been capping bulls for the last week.
Looking from a wider perspective, Oil prices are on track to close the week with minor gains to complete a 20% rally in the last three weeks. Investors are concerned that the Middle East conflict might cause the closure of the Strait of Hormuz, the gateway to one-fifth of the world’s crude supply, which would push crude prices to levels well above $100.
In the meantime, Israel and Iran continue exchanging fire and threats as the war enters its eighth day with no signs of de-escalation in sight. Israel’s defence minister threatened once again to kill Iran’s Supreme Leader, Ali Khamenei, and Iran has vowed to inflict “irreparable damages” if the US gets involved in the war.
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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