WTI holds position near $76.50, awaits Iran's reaction to assassination of Hamas leader
|- WTI price holds mild gains due to escalated geopolitical tensions in the Middle East.
- Concerns over a weak global economy weaken the demand for Oil.
- US and China Manufacturing PMIs dropped to 46.8 and 49.8, respectively, in July.
West Texas Intermediate (WTI) crude Oil price inches higher to near $76.50 per barrel during Friday’s Asian session. The price of crude Oil may find support from supply risks arising from heightened geopolitical tensions in the Middle East, despite ongoing global concerns about Oil demand.
Markets are closely watching Iran's reaction to the assassination of Hamas leader Ismail Haniyeh. According to the New York Times, Haniyeh was killed in Tehran after attending the inauguration of Iran's new president. Both Iranian officials and Hamas have attributed the attack to Israel.
Weak Purchasing Managers Index (PMI) data from both the United States (US) and China are raising concerns about Oil demand. The US ISM Manufacturing PMI fell to an eight-month low of 46.8 in July, down from 48.5 and below the forecasted 48.8. Similarly, China's Caixin Manufacturing PMI came in at 49.8 for July, missing the expected 51.5 and dropping from the previous 51.8.
Oil traders face uncertainty as they navigate a complex situation involving an economic slowdown and increased expectations for a Federal Reserve rate cut. The CME's FedWatch Tool shows that traders fully anticipate a 25-basis point rate cut on September 18. Additionally, traders are closely watching the upcoming July US Nonfarm Payrolls and Average Hourly Earnings data, set to be released later in the North American session, for insights into the US labor market.
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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