WTI Oil holds near weekly lows as Saudi Oil exports find an alternative route

WTI Crude eases below $97.00 and approaches one-week lows at the $96.00 area.
News that Saudi Arabia has found an alternative route to export Oil to Asia has eased concerns about supply disruptions.
The uncertain situation in the Middle East is keeping Crude prices stuck near the $100 level.

Guillermo Alcala FXStreet

Crude prices are trading lower for the second consecutive day on Thursday, with the US benchmark West Texas Intermediate (WTI) Oil trading just below $97, down from the four-month highs above $102.00 hit earlier this week and drawing closer to the bottom of the weekly trading range around $96.00.

News reporting that Saudi Arabia has found an alternative route through Oman to export crude to Asian countries has eased some concerns about supply disruptions caused by recent attacks on the Aast-West pipeline, which was used to transport Saudi Oil to the Yanbu port in the Red Sea, an alternative route to the blocked Strait of Hormuz.

Apart from that, Saudi authorities announced on Wednesday a plan to restore the critical pipeline, seeking to return to 40% of its capacity within days and projecting to be fully operational within six weeks.

In the US, data released earlier this week revealed a shorter-than-expected withdrawal of commercial Oil stocks in the week of September 11, which contributed to easing concerns about supply. Data released by the US Energy Information Administration on Wednesday showed that Crude inventories declined by 640K barrels last week, less than half the 1.6 million drop expected, while gasoline and distillate stocks increased from the previous week.

Meanwhile, conflict between the US and Iran remains surrounded by a high level of uncertainty. US President Donald Trump keeps saying that the US is “hopefully towards the end” of the war and claims that Iran is pushing for direct talks. Tehran authorities, however, deny it. This uncertainty is keeping Crude prices from retreating further from the key $100 level.

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

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.

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