- WTI price retreated after reaching the six-month high at $79.37 on Wednesday.
- EIA Crude Oil Stocks Change dropped for the eighth consecutive week, bringing it to its lowest level since April 2022.
- The US has broadened sanctions on Russian Oil producers and tankers, forcing Moscow's customers to seek alternative supplies.
West Texas Intermediate (WTI) Oil price retreats after reaching six-month highs, gaining more than 3%, in the previous session, trading around $78.50 per barrel during the European hours on Thursday. However, crude Oil prices gained ground due to tighter supply concerns and declining US stockpiles.
The US Energy Information Administration (EIA) data showed an eighth consecutive weekly decline in commercial crude inventories, now at their lowest level since April 2022. This represents the longest streak of declines since 2021, with inventories currently at a six-year seasonal low.
Additionally, concerns over potential supply disruptions have intensified due to new US sanctions targeting Russian Oil revenue. The US has expanded sanctions on Russian Oil producers and tankers, prompting Moscow's key customers to search globally for alternative supplies. Meanwhile, shipping rates have also surged as a result.
However, the US Energy Information Administration (EIA), in its Short-Term Energy Outlook report released on Tuesday, indicated that Oil prices are likely to face downward pressure over the next two years as global production growth outpaces demand.
Global Oil demand is now projected to average 104.1 million barrels per day (bpd), revised down from the previous estimate of 104.3 million bpd and still trailing pre-pandemic levels. According to Reuters, many analysts expect an oversupplied Oil market by 2025, driven by a significant slowdown in demand growth in 2024, particularly in the world's largest energy-consuming nations, the US and China.
According to Reuters, Rory Johnston, founder of Commodity Context, stated that the Organization of the Petroleum Exporting Countries and its allies, known collectively as OPEC+, are likely to remain cautious about increasing supply despite the recent surge in Oil prices. OPEC+ has been curtailing output over the past two years to support the 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 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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