WTI inches higher to near $70.50 following drop in US Oil stocks

WTI gained ground due to an unexpected drop in US Oil inventories.
US Crude Oil Stock declined by 2.192 million barrels in the previous week, against the expected 2.3-million-barrel increase.
Israel's military and the Shin Bet security service confirmed the killing of the militant leader Yahya Sinwar on Wednesday.

Akhtar Faruqui FXStreet

West Texas Intermediate (WTI) Oil price extends its gains for the second consecutive day, trading around $70.40 per barrel during Asian hours on Friday. The rise in crude Oil prices was supported by an unexpected drop in US Oil inventories.

According to the Energy Information Administration (EIA), US Crude Oil Stock fell by 2.192 million barrels in the week ending October 11, defying market expectations of a 2.3 million barrel increase and contrasting with the previous week's 5.81 million barrel rise.

In addition to the drop in US Oil inventories, rising tensions in the Middle East are providing further support for Oil prices. Israel's military and the Shin Bet security service confirmed on Thursday that Yahya Sinwar, the Gaza Strip Chief of the Palestinian Islamist group Hamas, was killed by Israeli forces during an operation in southern Gaza on Wednesday.

The killing of Sinwar has heightened concerns, especially among the families of Israeli hostages taken to Gaza by Hamas, who fear their loved ones may now be in greater danger following the killing of the militant leader, according to Reuters.

However, the upside potential for WTI Oil prices may be limited as the EIA report showed that US crude Oil production reached a record high of 13.5 million barrels per day last week. Additionally, Libyan Oil output has resumed, and the Organization of the Petroleum Exporting Countries and their allies (OPEC+) have plans to further unwind production cuts in 2025, as reported by Reuters.

On Tuesday, the International Energy Agency (IEA) indicated that the global Oil market is heading for a significant surplus in the coming year. While world Oil demand is expected to rise by 860,000 barrels per day in 2024, this is a downward revision of 40,000 barrels per day from the previous forecast. The IEA attributed this to slower economic growth in China and a shift toward electric vehicles, which have begun to reshape the Oil demand outlook for China, the world's largest Oil importer.

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

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.

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