WTI plunges to near $67.50 as Crude oil's Middle East risk premium fades
|- WTI price edges lower to near $67.55 in Thursday’s Asian session.
- Easing fear of crude supply and China’s demand woes could weigh on the WTI price.
- Investors will monitor the US advanced Q3 GDP on Wednesday ahead of the employment data.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $67.55 on Tuesday. The WTI price plunges as the limited military operation eased concerns about a potential all-out war in the Middle East.
On Saturday, Israel targeted Iran's military installations in three provinces in reaction to Tehran launching ballistic missiles at Israel on October 1. However, Israel did not strike Iran's oil or nuclear facilities in retaliation for Iran's ballistic missile attack, and Iran's official media claimed that oil output was normal. This, in turn, undermines the WTI price as a fear of significant disruption in the crude supply fades.
Furthermore, weak demand outlooks and China's economic slowdown contribute to the WTI’s downside. Data released by China's National Bureau of Statistics on the weekend showed the country's industrial profits fell by 27.1% YoY in September, the steepest decline since the pandemic.
A report from the International Energy Agency (IEA) indicated that oil demand is estimated to grow at only half the pace in 2024 and 2025 compared to 2022 and 2023, primarily due to a decline in Chinese demand.
The flash Gross Domestic Product (GDP) data from the United States (US) for the third quarter will be published on Wednesday, which is estimated to expand 3% in Q3. The US Nonfarm Payrolls will be released on Friday. If the data show a stronger-than-expected outcome, this could lift the US Dollar and weigh on the USD-denominated WTI price.
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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