WTI jumps above $70.00 as Iran missile strike on Israel sparks fears In global oil markets
- WTI price spikes to near $70.65 in Wednesday’s Asian session.
- Middle East geopolitical risks underpin the WTI.
- Crude Oil Inventory dropped, falling short of expectations.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $70.65 on Wednesday. WTI price edges higher after Iran launched missiles at Israel in a direct attack, raising fear of supply disruptions in a region.
Iran launched over 200 ballistic missiles at Israel, and Prime Minister Benjamin Netanyahu vows to retaliate against Iran for a missile attack on Tuesday, but Tehran warned that any response would result in "vast destruction, fuelling fears of a wider war. Additionally, Israel warned it could attack Iranian oil facilities, which could lead to a regional war with Iran, increasing the risk of crude supply disruptions.
US crude oil inventories dropped less than expected last week. According to the American Petroleum Institute (API), crude oil stockpiles in the United States for the week ending September 27 declined by 1.5 million barrels, compared to a fall of 4.339 million barrels in the previous week. The market consensus estimated that stocks would decline by 2.1 million barrels.
On the other hand, less dovish remarks from the Federal Reserve (Fed) Chair Jerome Powell that pushed back against calls for another big rate cut in November could weigh on the WTI price.
Fed Chair Jerome Powell stated that more rate cuts are likely as the economy remains on solid ground, yet he cautioned against rapid changes.
Traders will monitor the US Federal Reserve (Fed) Thomas Barkin, Beth Hammack, Alberto Musalem, and Michelle Bowman's speeches for fresh impetus. Any hawkish comments from Fed officials could drag the WTI price lower. It’s worth noting that lower interest rates will reduce the cost of borrowing, which generally lifts the oil demand.
(This story was corrected on October 2 at 08:30 GMT to remove Bostic from Fed's speakers on Wednesday.)
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
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.
