WTI edges higher to near $73.00 amid supply worries

WTI extends its recovery to a two-week high near $72.95 in Wednesday’s early Asian session.
The rising Middle East geopolitical tensions boost the WTI price.
US crude oil stockpiles climbed by 9.043 million barrels last week, according to the API.

Lallalit Srijandorn FXStreet

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $72.95 during the early Asian session on Wednesday. The WTI price edges higher to a two-week high amid the escalating geopolitical tensions in the Middle East.

The latest US sanctions imposed on the Russian oil industry in January raised concerns about Russian and Iranian oil supplies, boosting the black gold price. "With the U.S. bearing down on Iranian exports and sanctions still biting into Russian flows, Asian crude grades remain firm and underpin the rally from yesterday," PVM oil analyst John Evans said.

Additionally, the rising Middle East geopolitical risks contribute to the WTI’s upside. Israeli Prime Minister Benjamin Netanyahu said that if Hamas did not release Israeli hostages by noon on Saturday, a fragile ceasefire in Gaza would end. These remarks came after US President Donald Trump urged on Monday that Hamas free all prisoners by noon Saturday or he would consider canceling the Israel-Hamas ceasefire and "let hell break out.

US crude inventories rose sharply last week, which might cap the upside for the WTI. The American Petroleum Institute (API) weekly report showed crude oil stockpiles in the United States for the week ending February 7 climbed by 9.043 million barrels, compared to a rise of 5.025 million barrels in the previous week. The market consensus estimated that stocks would increase by 2.8 million barrels.

On Monday, Trump raised tariffs on steel and aluminium imports to the United States to 25% "without exceptions or exemptions.” Analysts believe that tariff policies by the Trump administration could be inflationary and put further pressure on the Fed to keep interest rates elevated. This, in turn, could lift the Greenback and drag the USD-denominated commodity price lower.

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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