WTI rises amid declining US inventories and geopolitical woes
|- WTI climbs 1.46% to $78.91, buoyed by US crude inventory drop and geopolitical risks impacting supply.
- EIA report reveals larger-than-expected decrease in gasoline stocks, with crude inventories falling against forecasts.
- Market eyes OPEC and IEA updates on oil demand, with Fed policy shifts potentially influencing future price movements.
West Texas Intermediate (WTI), the US crude oil benchmark, rises some 1.46% on Wednesday after bouncing from a daily low of $77.33 in the early North American session. Geopolitical risks threaten to underwhelm supply, and the expectation that the Federal Reserve might begin its easing cycle underpins oil prices. At the time of writing, WTI exchanges hands at $78.91.
Oil prices gain as supply concerns intensify, Fed easing speculations grow
The US Energy Information Administration (EIA) revealed that crude oil inventories from the previous week declined by 1.5 million barrels, less than the 1.34 million barrels increase expected by analysts. Further data showed that gasoline inventories dived almost three times estimates while distillate fuels grew. The US Strategic Petroleum Reserve grew from 361 million barrels to 361.8 million as the US re-stock its inventories. After the data, WTI rose as high as $79.32 but settled below the $79.00 figure.
Aside from this, geopolitical events continued to drive oil prices. Ukraine attacked Russian refineries, causing a fire at an oil refinery on Wednesday. Russian President Vladimir Putin said it was an attempt to disrupt Russia’s presidential election.
Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) stuck to its forecast for oil demand growth of 2.25 million barrels per day in 2024, which exceeded analysts' forecasts.
On Thursday, the International Energy Agency (IEA) is expected to update its figures, which are expected to be lower than OPEC’s.
Besides those factors, speculations that major central banks would begin to cut borrowing costs might drive WTI prices higher. Once the Federal Reserve begins to ease policy, the Greenback would be under pressure, favoring an upside in oil prices.
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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