- WTI price gains traction as traders adopt caution amid escalating tensions in the Middle East and anticipated ceasefire discussions.
- Oil traders are keeping a close eye on Israel's response to Iran's missile attack on October 1.
- US Secretary of State Antony Blinken emphasized that the United States does not endorse a prolonged Israeli military campaign in Lebanon.
West Texas Intermediate (WTI) Oil price edges higher after two days of losses, trading around $70.40 per barrel during the Asian session on Friday. Crude Oil is set for a slight weekly gain as prevailing tensions in the Middle East and upcoming ceasefire discussions for Gaza keep traders cautious.
Oil market participants are closely watching for Israel's response to Iran's missile attack on October 1, which raised concerns about potential strikes on Tehran's Oil infrastructure that could disrupt supply chains. However, reports indicate that Israel may target Iranian military sites rather than nuclear or oil facilities, according to Reuters.
In parallel, US and Israeli officials are preparing to resume talks on a potential ceasefire and the release of hostages in Gaza in the coming days. US Secretary of State Antony Blinken stated Thursday that the United States does not support a prolonged Israeli campaign in Lebanon, while France has advocated for an immediate ceasefire and diplomatic efforts.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, retreated from its late-July high, hovering around 104.00. This pullback supported demand for dollar-priced Oil.
However, Oil prices faced downward pressure following a larger-than-anticipated rise in US stockpiles last week, driven by increased imports and an unexpected rise in gasoline inventories as refineries boosted output after seasonal maintenance.
Data from the US Energy Information Administration (EIA) on Wednesday showed a crude oil stock build of 5.474 million barrels, bringing total inventories to 426 million barrels for the week ending October 18, far surpassing the forecasted 0.7 million-barrel increase.
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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