WTI drifts higher to four-month high near $63.50 amid US inventory drop, Iran risks

WTI price climbs to a four-month high near $63.60 in Thursday’s early Asian session.
US crude oil stockpiles posted a weekly decline.
Trump warned Iran to make a nuclear deal or face military strikes.

Lallalit Srijandorn FXStreet

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $63.60 during the Asian trading hours on Thursday. The WTI price rises to its highest since late September as crude oil inventories drop and geopolitical tensions in Iran escalate.

According to the US Energy Information Administration (EIA) weekly report, crude oil stockpiles in the US for the week ending January 24 fell by 2.296 million barrels, compared to a rise of 3.602 million barrels in the previous week. This unexpected decline in crude inventories implies a greater oil demand, supporting the WTI price.

Reuters reported that a US aircraft carrier and supporting warships have arrived in the Middle East, adding to US President Donald Trump’s capabilities to defend US forces or potentially take military action against Iran.

On Wednesday, Trump urged Tehran to “come to the table” and negotiate a “fair and equitable deal,” or the next US attack would be far worse. Iran responded with a threat to strike back against the US, Israel and those who support them. Heightened geopolitical risk in the Middle East and concerns over supply disruptions from OPEC’s fourth-biggest crude producer could boost the black gold in the near term.

On the other hand, renewed US Dollar (USD) demand could weigh on the USD-denominated commodity price. US Treasury Secretary Scott Bessent said on Wednesday that the country has a strong dollar policy, adding that Washington's focus remains on establishing robust economic fundamentals.

WTI Oil FAQs

What is WTI Oil?

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.

What factors drive the price of WTI Oil?

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.

How does inventory data impact the price of WTI Oil

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.

How does OPEC influence the price of WTI Oil?

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.

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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