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Crude Oil sheds further weight, WTI sinks below $63 on US-Iran headlines

  • Crude Oil markets are on the defensive on Thursday as supply fears give way to geopolitical headlines.
  • WTI is down sharply on the day, falling back below $63.00/barrel.

West Texas Intermediate (WTI) US Crude Oil took a fresh leg down on Thursday, bullied into the low end by a combination of the potential for a sharp pullback from US-Iran tensions, and growing scepticism about the potential for a sweeping 'demand wave' from China that energy conglomerates have been banking on for years.

The International Energy Agency (IEA) was begrudgingly forced to trim its global Crude Oil demand outlook on Thursday, citing softer-than-expected demand growth in the Asia segments and a still-high surplus overhang, even after January's brief constraint fears bit barrel bids.

Easing tensions mix with underwhelming demand to sink barrel prices

According to statements from Israeli President Benjamin Netanyahu, US President Donald Trump and Iran's Ali Khamenei are approaching what could be a deal that would see the end of still-rising Middle East tensions between the two blustery world leaders. Crude Oil traders have steeply pared their bets on WTI, which has now fallen over 3.5% from the day's open at the time of writing. WTI barrel prices are rapidly approaching the $62.00 major handle, which is seated conveniently close to the 200-day Exponential Moving Average (EMA).

WTI daily chart

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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Joshua Gibson

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

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