WTI Oil rises beyond $100 amid fresh concerns of supply disruptions
- WTI Oil prices cross beyond the $100 barrier, on track for a more than 10% rally over the last three weeks.
- Attacks on Saudi Oilfields and Iran's tightening grip on the Strait of Hormuz have reactivated concerns about supply disruptions.
- Reports that the US and Israel are planning further coordinated attacks on Iran have contributed to boosting oil prices.
Oil rallies further on Friday, boosted by news of increasing incidents in vessels attempting to cross the key Strait of Hormuz this week, while the Iran-backed Houthis renewed their attacks on Saudi oilfields. This has pushed the US benchmark West Texas Intermediate (WTI) to levels beyond $100 per barrel on Friday, on track for a more than 10% appreciation in the last three weeks.
Concerns about supply disruptions from Gulf countries are back to the forefront, as Iran’s forces tightened their grip on the critical Strait of Hormuz corridor. The Iranian Islamic Revolutionary Guard Corps (IRGC) navy affirmed that four more tankers have been hit while involved in “illegal” Oil transfers, and three others hit mines while attempting to cross the waterway.
The Middle East conflict heads into its eighth month with no end in sight
This comes as the Yemeni Houthi militias intensify their attacks on Saudi Arabian targets. Four people were killed and eight more wounded in attacks on Aramco’s Shaybah Oilfield, and the airport of Dammam earlier this week.
Meanwhile, the conflict between US-Israel and Iran approaches its eighth month without a clear end in sight. A report by the New York Times citing US officials suggested on Thursday that the US and Israel might be drawing plans for a new wave of coordinated attacks after November’s midterm elections.
The IRGC, in turn, warned that further attacks on their soil would prompt Tehran to shift into an offensive strategy and invade neighbouring countries, which would extend the conflict within the region and strain crude Oil flows further.
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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