WTI Oil approaches $63.00 following attacks on Russian plants
- Crude Oil extends gains for the second consecutive day and reaches session highs at $63.00.
- News that Ukraine attacked Russian oilfields has pushed prices higher.
- Concerns about oversupply continue to weigh on prices.
Crude Oil is posting minor gains on Monday, with price action approaching levels close to $63.00 after bouncing from lows of $61.50 on Friday. News about Ukrainian attacks on Russian plants has provided some support, although the prospects of weaker demand in the near-term keep upside attempts limited so far.
News has reported that Ukrainian drones hit some of Russia’s largest oil-producing plants over the weekend as US President Trump urged all NATO members to stop buying Russian crude and called for sanctions on China for doing so.
A Russian spokesperson affirmed that the attacks have inflicted only minor damage. Still, the recall of a series of attacks last summer, which crippled Russia’s processing capacity, has contributed to lifting prices on Monday.
Oil upside attempts, however, are likely to remain limited amid growing concerns about oversupply. The slower output hike approved by OPEC+ countries this week has been offset by higher US production, while the economic downturn in most of the world’s leading economies anticipates a future decline in demand.
In this context, the prices of the YS benchmark WTI remain struggling near multi-month lows. Price action remained trapped between the mentioned $61.50 level and $63.70 on the upside last week after being rejected at levels near $66.00 earlier in September. Looking from a wider perspective, WTI prices have depreciated about 20% from January’s highs.
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
Guillermo Alcala
FXStreet
Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.
