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WTI falls below $70.50 due to oil supply surge from Middle East

  • WTI declines as surging Middle Eastern oil supply overshadows geopolitical anxieties.
  • QatarEnergy issued its first July–August crude tender since the US–Iran conflict began.
  • Oil prices initially spiked after a suspected projectile attack on a cargo vessel off Oman.

West Texas Intermediate (WTI) depreciates after registering over 2% gains in the previous day, trading around $70.30 per barrel during the Asian hours on Friday. Crude oil prices ground lower as a massive surge in Middle Eastern supply ultimately overshadowed the geopolitical anxieties sparked by a fresh tanker attack near the Strait of Hormuz.

Crude oil prices lost ground as investors realized that actual shipping traffic through the strait remained highly active and that a wave of fresh crude was hitting the market. In a highly anticipated move, QatarEnergy issued a tender offering al-Shaheen, Qatar Marine, and Qatar Land crude for July-to-August loading, marking its first such move since the US-Iran conflict began. According to tender documents seen by Reuters, the producer is giving buyers the flexibility to load or lift supplies via ship-to-ship transfers between Fujairah and Sohar, adding significant volumes to the market alongside recent July-loading tenders from Iraq's SOMO and Kuwait Petroleum Corp.

Further compounding the supply surge, refining giant Saudi Aramco officially resumed oil loading at its Ras Tanura terminal in the Gulf following a nearly four-month halt. Tracking data from LSEG showed two Very Large Crude Carriers, each capable of carrying 2 million barrels of oil, actively loading at the terminal while a third waited nearby. Combined with Abu Dhabi National Oil Co selling at least 48 million barrels of crude across three separate tenders this month, this sweeping resumption of regional export activity ultimately convinced traders that the physical supply of oil remains more than secure despite the ongoing military risks.

Oil prices had initially spiked during early Asian trading hours following a suspected projectile attack on a cargo vessel off the coast of Oman, an incident that abruptly halted United Nations (US) evacuation efforts in the vital chokepoint and reignited deep fears over global energy security. The friction intensified after the market closed when US officials reported that Iranian forces had fired on the cargo ship, prompting Iranian authorities to issue a stark warning that they would no longer guarantee the safety of any vessels traveling outside designated shipping lanes.

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.

Author

Akhtar Faruqui

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.

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