WTI falls below $83.00 despite hostilities in the Middle East

WTI price tumbles to $82.80 in Thursday’s early Asian session.
Fears of wider conflict in the Middle East and concerns over oil supply disruption could lift the WTI price.
US crude oil inventories fell by 7.167 million barrels last week, EIA said.

Lallalit Srijandorn FXStreet

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $82.80 during the early Asian trading hours on Thursday. WTI falls amid some profit-taking despite escalating conflicts in the Middle East.

Traders book some profits following the US Federal Reserve (Fed) interest rate decision. The US central bank decided to keep the interest rates unchanged at a range of 3.5% to 3.75% at its July policy meeting on Wednesday, as widely expected. Fed Chairman Kevin Warsh said during the press conference that while the Fed won’t provide hints on where rate policy is heading, it will take necessary steps to meet its 2% inflation target.

However, renewed military escalation in the Middle East could raise concerns over crude flows from the region and boost the WTI price. US President Donald Trump said on Wednesday that the US would strike back at Iran after a recent attack that targeted a military base in Jordan.

The Iranian military fired ballistic missiles overnight at a US airbase and command center in Jordan, all of them intercepted, per Bloomberg. The US and Saudi Arabia also struck Tehran-backed militias in Iraq, ending a days-long pause in hostilities.

Meanwhile, Yemen’s Iran-backed Houthi rebels are also tightening pressure on Red Sea oil flows. Reuters reported that the Houthis are considering imposing fees on commercial ships sailing through the narrow Bab el-Mandeb gateway, which links the southern Red Sea with the Gulf of Aden.

US crude oil inventories fell more than expected last week. According to the US Energy Information Administration (EIA), crude oil stockpiles in the US for the week ending July 24 dropped by 7.167 million barrels, compared to a rise of 2.011 million barrels in the previous week. The market consensus was for a decline of 2.5 million barrels.

(This story was corrected on July 30 at 01:35 GMT to say that the US central bank decided to keep the interest rates unchanged at a range of 3.5% to 3.75% at its July policy meeting on Wednesday, as widely expected, not Thursday.)

Brent slides as US extends pause on Iran strikes

Rabobank’s Senior Market Strategist Benjamin Picton highlights that active Brent crude futures “fell by almost 5% yesterday as the US extended its pause on striking Iran.” He notes that Donald Trump framed the decision as an opportunity to give diplomacy another chance, indicating that the lull was underway to allow “very deep talks” with Iran, but stressing that his patience was limited, saying “either it goes fast or not at all.”

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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