WTI edges higher to near $72.50 driven by potential supply disruptions
|- WTI breaks its losing streak due to rising concerns over supply constraints amid Middle East tensions.
- Hamas appointed a new leader in Gaza on Tuesday after the assassination of its former chief the previous week.
- API Weekly Crude Oil Stock reported an increase of 0.18 million barrels against the expected 0.85 million barrels.
West Texas Intermediate (WTI) crude Oil ends a four-day losing streak, trading around $72.50 per barrel on Wednesday. The Oil prices are getting support from rising concerns about supply constraints due to ongoing geopolitical tensions in the Middle East.
Hamas named Yahya Sinwar as its new leader in Gaza following the assassination of former chief Ismail Haniyeh on Tuesday. There are concerns about potential escalation in the region, with Iran and its allies—Hamas and Hezbollah—vowing retaliation against Israel and the United States for the killing of the Hamas leader, according to Reuters.
However, the potential for a rebound in Oil prices may be limited by bearish demand sentiment. Chinese trade data showed that daily crude Oil imports in July fell to their lowest level since September 2022, affecting the world’s largest crude importer.
The American Petroleum Institute (API) reported an increase of 0.18 million barrels in the Weekly Crude Oil Stock for the week ending August 2, falling short of the expected 0.85 million barrels. This follows a previous decline of 4.495 million barrels. Additionally, the US Energy Information Administration is set to release its Crude Oil Stocks Change report later in the North American session.
On Tuesday, Reuters reported that the EIA estimates global Oil inventories decreased by approximately 400,000 barrels per day (bpd) in the first half of 2024. The EIA projects stockpiles will decline by around 800,000 bpd in the second half of the year.
The Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russia (OPEC+), are sticking to their plan to gradually end voluntary production cuts starting in October. Nevertheless, a Reuters survey released on Friday showed that OPEC's oil output increased in July, even with the group's production cuts in effect.
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 13 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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