WTI edges higher above $61.50 on OPEC+ output hike, geopolitical risks
- WTI price holds positive ground near $61.80 in Tuesday’s early European session.
- OPEC+ agreed to raise oil output by 137,000 barrels per day from November.
- Concerns over potential supply disruptions following recent Ukrainian attacks on Russian energy infrastructure boost the WTI price.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $61.80 during the early European trading hours on Tuesday. The WTI extends the rally as the Organization of the Petroleum Exporting Countries and its allies (OPEC+) agreed to a smaller-than-expected hike in its crude production levels, easing some fears of a growing supply glut.
OPEC+ will raise oil output from November by 137,000 barrels per day (bpd), below market expectations of as much as a 500,000 bpd boost to production. The group has increased its oil output targets by more than 2.7 million bpd this year, accounting for over 2.5% of world demand.
Geopolitical risks might contribute to the WTI’s upside. The ongoing Russia-Ukraine conflict has created uncertainty over Russian crude supply, adding a risk premium to the market. Reuters reported on Tuesday that Russia's Kirishi oil refinery halted its most productive distillation unit, CDU-6, following a drone attack and subsequent fire on October 4. The recovery process is expected to take around one month.
Meanwhile, the US government shutdown entered its seventh day as US Senators failed to pass spending proposals to reopen the federal government. This has led to fears over a major economic impact on the US. Additionally, any slowdown in demand due to weak economic growth triggered by US trade tariffs is likely to exacerbate the surplus and undermine the WTI price.
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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