WTI advances to near $71.50 due to rising tensions in Middle East
- WTI price appreciates due to possible supply disruptions amid mounting tensions in the Middle East.
- Hezbollah and Israel exchanged missile attacks, with the Lebanese militant group launching missiles deep into Israeli territory.
- Shell may shut down production at its two facilities in the Gulf of Mexico.
West Texas Intermediate (WTI) Oil price continues to gain ground, trading around $71.50 during the Asian hours on Monday. Crude Oil prices are rising due to concerns over potential supply disruptions amid escalating tensions in the Middle East.
Hezbollah and Israel engaged in heavy exchanges of fire on Sunday, with the Lebanese militant group launching missiles deep into northern Israeli territory following intense bombardment—some of the most severe in nearly a year of conflict, according to CNN.
On Saturday, Israel conducted approximately 300 strikes on Hezbollah positions, describing the actions as preemptive measures to prevent a planned attack. In response, Hezbollah fired a barrage of rockets and missiles into Israel, asserting that it was retaliating for Israeli strikes in Lebanon.
Expectations that the US Federal interest rate cut last week will support crude Oil demand. Lower borrowing costs may support growing economic activities in the world’s largest Oil consumer United States (US), which could improve the Oil demand. Federal Reserve (Fed) policymakers predict additional rate cuts of 50 basis points (bps) in 2024, following an aggressive 50 basis point rate cut to a 4.75-5.00% range last week.
According to a Reuters report on Sunday, Shell plans to shut down production at its Stones and Appomattox facilities in the Gulf of Mexico as a precautionary measure due to a tropical disturbance. Shell stated, "We are in the process of safely pausing some of our drilling operations and currently have no other impact on our production across the Gulf of Mexico."
(This story was corrected on September 23 at 08:15 GMT to say, in the fourth paragraph, that policymakers also predicted further rate cuts of 50 basis points (bps) by the end of the year, not 75 bps.)
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.
Author
Akhtar Faruqui
FXStreet
Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.
