WTI declines to near $62.50 amid oversupply fears
- WTI price tumbles to near $62.50 in Friday’s early European session.
- The IEA said global oil demand growth would be weaker than expected this year.
- US crude oil inventories saw a massive build last week, weighing on the WTI price.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $62.50 during the early European trading hours on Friday. The WTI price attracts some sellers amid persistent oversupply concerns.
The International Energy Agency (IEA) on Thursday projected in its monthly report that this year global oil demand growth will be weaker than previously expected, with overall supply set to exceed demand.
Furthermore, a significant build in US crude stockpiles might contribute to the WTI’s downside. According to the US Energy Information Administration (EIA) weekly report, crude oil stockpiles in the US for the week ending February 6 climbed by 8.53 million barrels, compared to a fall of 3.455 million barrels in the previous week.
On the other hand, rising tensions between the United States and Iran could underpin the WTI price. The Wall Street Journal reported on Wednesday that the US is considering seizing tankers with Iranian crude, and the US could send a second aircraft carrier strike group to the Middle East should nuclear talks with Iran fail.
Traders will closely monitor the developments surrounding diplomatic relations between the US and Iran. “The main driving force in the oil markets currently is still US-Iran tensions,” said Zhou Mi, an analyst at a research institute affiliated with Chaos Ternary Futures Co. “Prices are likely to remain volatile.”
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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