WTI advances to near $66.50 following attacks on Iraqi Oilfields
- WTI price gains ground amid rising threats over supply concerns.
- Iran-backed militias are believed to be behind this week’s attacks on oil fields in Iraqi Kurdistan.
- US crude inventories fell by 3.9 million barrels last week, significantly exceeding analysts' expectations of a 552,000-barrel draw.
West Texas Intermediate (WTI) Oil price extends its gains for the second successive day, trading around $66.40 per barrel during the Asian hours on Friday. Crude Oil prices receive support from concerns over supply risks.
According to a Reuters report, Iran-backed militias the likely behind the attacks on the oilfields in Iraqi Kurdistan this week; however, no group has claimed responsibility. As a result, Oil production in the semi-autonomous region has been cut by 140,000 to 150,000 barrels per day, more than half of its usual output of around 280,000 bpd, according to two energy officials.
Additionally, US crude inventories dropped by 3.9 million barrels last week, according to the government data, compared with analysts' expectations in a Reuters poll for a 552,000-barrel draw. The International Energy Agency noted last week that rising output has not translated into higher inventories, signaling robust demand.
JPMorgan analysts reported that seasonal travel activity has also supported the market. In the first half of July, global Oil demand averaged 105.2 million barrels per day, up 600,000 bpd year-on-year and in line with projections, per Reuters.
ING analysts on Friday said that near-term Oil fundamentals are likely to remain supportive, with the market expected to stay relatively tight through the current quarter before easing somewhat in the final three months of the year.
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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