WTI touches one-week high, eyes $57.00 amid rising geopolitical tensions
- WTI attracts fresh buyers on Monday as rising geopolitical risks fuel supply concerns.
- An uncertain global demand outlook might cap any further gains for the commodity.
- The mixed fundamental backdrop warrants caution before placing directional bets.
West Texas Intermediate (WTI) US Crude Oil prices kick off the new week on a positive note and touch a one-week top, around the $57.00 neighborhood during the Asian session. The intraday rise, however, lacks bullish conviction amid a combination of diverging forces.
The US intercepted a Venezuelan oil tanker over the weekend. Adding to this, a US official said that the US Coast Guard is in active pursuit of a sanctioned dark fleet vessel that is part of Venezuela's illegal sanctions evasion. This comes on top of fresh Israel–Iran tensions and the protracted Russia-Ukraine war, which adds to the geopolitical risk premium and, in turn, is seen as a key factor acting as a tailwind for Crude Oil prices.
Israel's Prime Minister Benjamin Netanyahu said that officials are concerned that Iran is expanding production of its ballistic missiles and are preparing to brief US President Donald Trump on options for attacking the missile program again. Moreover, Russian President Vladimir Putin’s top foreign policy aide said on Sunday that changes made by the Europeans and Ukraine to US proposals did not improve prospects for peace.
However, lingering oversupply worries, along with an uncertain global demand outlook, might hold back traders from placing aggressive bullish bets and cap Crude Oil prices. This makes it prudent to wait for strong follow-through buying before confirming that the black liquid has formed a near-term bottom around the $55.00-$54.90 region or the lowest level since April, touched last week, and positioning for further appreciation.
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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