WTI rallies amid record Iraqi exports, US sanctions
- WTI rallied is close to $62, whereas the market is stuck below $62.50 for October.
- Record Oil exports from Iraq and ongoing US sanctions on Russian producers are reshaping supply expectations.
- Hopes of a US-China trade deal sustain sentiment and limit further downside in Oil prices.
West Texas Intermediate (WTI) US Oil trades around $61.70 on Monday at the time of writing, up 0.65% on the day. The market consolidates after a volatile end to last week, when prices briefly surpassed $62 before easing, continuing a consolidation below the $62.50 level since the beginning of October.
Oil traders are reacting to reports from Iraq’s Oil Ministry confirming record crude exports above 102 million barrels in September. The announcement raised concerns about potential oversupply within the Organization of the Petroleum Exporting Countries and its allies (OPEC+), even as Baghdad negotiates adjustments to its production quota.
At the same time, the United States (US) has introduced sweeping sanctions against Russia’s leading Oil companies, Lukoil and Rosneft. According to Société Générale analysts, these measures, which freeze assets and ban transactions with US entities, could significantly reduce Russian supply, partially offsetting the impact of higher Iraqi output and helping stabilize prices. "This marks the most forceful action Washington has taken against Russian businesses since the invasion of Ukraine", noted the analysts.
On the demand side, optimism surrounding renewed dialogue between US President Donald Trump and Chinese President Xi Jinping is providing support to the Crude Oil market. The two leaders are expected to meet later this week to finalize a preliminary trade agreement aimed at avoiding new tariffs and maintaining the flow of key materials between the world’s largest economies.
US Treasury Secretary Scott Bessent indicated that recent negotiations during the Association of Southeast Asian Nations (ASEAN) summit were “fruitful,” while confirming that threats of 100% tariffs on Chinese imports have been temporarily withdrawn. Beijing’s willingness to delay restrictions on rare earth exports also suggests progress in de-escalating trade tensions.
Overall, the combination of geopolitical risks, record Iraqi output, and prospects of an extended US-China trade truce keeps the WTI price supported, with traders awaiting this week’s American Petroleum Institute (API) inventory data for further direction.
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
Ghiles Guezout
FXStreet
Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.
