WTI recovers to near $72.50 amid Middle East geopolitical risks, US seeks to purchase more oil for SPR
- WTI price rebounds near $72.50 in Wednesday’s early Asian session.
- Fear of a wider Middle East war might cap the WTI’s downside in the near term.
- Worries over Chinese demand might drag the price lower.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $72.50 on Thursday. WTI price recovers its recent losses amid concerns about escalating geopolitical tensions in the Middle East and the US Department of Energy’s plan to buy 3.5 million barrels of crude for the Strategic Petroleum Reserve (SPR). However, deteriorating macroeconomics might cap the upside for black gold in the near term.
Fear of wider Middle East conflict boosts the WTI price. Iran's vow of retaliation against Israel and the US following the assassination of two militant leaders has sparked fears of a broader Middle East conflict, potentially affecting oil supplies from the region, per Reuters.
On Tuesday, the US Department of Energy announced that it would buy 3.5 million barrels of crude oil for the Strategic Petroleum Reserve. The DOE seeks up to 1.5 million barrels of sour crude for delivery in January 2025, and a second solicitation will be issued on August 12 for the purchase of about 2 million barrels and also for January 2025 delivery.
About the data, crude oil stockpiles in the United States for the week ending August 2 increased by 180K barrels, compared to -4.495 million barrels in the previous week. The market consensus estimated that stocks would decline by 4.495 million barrels, according to the American Petroleum Institute (API) on Wednesday. "Oil fundamentals are still suggesting an undersupplied oil market, with oil inventories still falling," UBS analyst Giovanni Staunovo said.
On the other hand, sluggish Chinese demand could weigh on the WTI price as China is the top largest consumer of oil in the world. The Chinese Trade Balance is due on Wednesday, and Consumer Price Index (CPI) inflation data will be released on Friday. The CPI is expected to show an increase of 0.3% YoY in July, compared to the previous reading of 0.2%. Oil traders will take cues from these reports and find trading opportunities surrounding the WTI price.
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 13 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.
