WTI Oil bounces up on geopolitical tensions but fails to confirm above $72.00
Crude prices have been capped at the $72.00 level but remain 12% above May's range.
Fears of escalating tensions between Israel and Iran are keeping downside attempts limited.
Russia's Deputy Prime Minister, Novak, is pressuring the OPEC+ to reconsider output hikes.
The pullback in Crude prices witnessed on Monday found support on Tuesday as escalating tensions in the Middle East revived fears of an Oil supply disruption, while Russia is pressuring OPEC+ to reconsider further output hikes.
The price of the West Texas Intermediate barrel bounced up from Monday’s lows near $68.00. Upside attempts have remained limited below the $72.00 level so far, but still at levels 12% above May’s trading range.
Fears of supply disruptions are underpinning Crude prices
The escalating war between Israel and Iran is supporting Oil prices. A new exchange of missiles this night and US President Trump’s early departure from the G7 after calling a meeting of the National Security Council have boosted concerns about a potential involvement of the US in the conflict, which could lead to supply disruptions and higher prices.
Beyond that, Russia’s Deputy Prime Minister, Aleksander Novak, has urged OPEC+ to revert their decision to hike crude output as, he reckons, global Oil prices are not appropriate for most producers at the moment.
In the economic calendar, the American Petroleum Institute (API) will release the weekly Oil stocks report, which might have some impact on prices. Beyond that, the US Retail Sales are expected to have contracted in June, which might add pressure on the Fed to lower interest rates in the coming months.
The Fed will release its economic and monetary policy projections on Wednesday, with investors looking for hints of further monetary easing in the near term. Such a scenario would support growth in the world’s leading economy and increase demand for Oil. The impact on crude prices would be positive.
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.
near term
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