WTI retreats as US supply recovers, Middle East tensions sustain risk premium
- WTI US Oil edges lower but remains supported by temporary production disruptions in the United States.
- Losses linked to the winter storm are gradually easing, although supply has not yet been fully restored.
- Geopolitical tensions in the Middle East keep a latent risk premium in the Oil market.
West Texas Intermediate (WTI) US Oil trades around $60.50 on Tuesday at the time of writing, down 0.25% on the day, extending the pullback seen in the previous day. Crude Oil remains under pressure despite lingering supply concerns, as investors weigh conflicting signals related to production, geopolitics and the broader market balance.
Oil prices could nevertheless find some support from the US supply side. According to estimates cited by Reuters, US producers lost up to two million barrels per day over the weekend after a winter storm disrupted energy infrastructure and power grids. Consultancy Energy Aspects said outages peaked on Saturday, with the Permian Basin accounting for the bulk of the decline at around 1.5 million barrels per day. Shut-ins are gradually easing, with Permian losses estimated near 700,000 barrels per day on Monday, and output expected to be fully restored by the end of the month.
At the same time, markets remain focused on geopolitical risks. Rising tensions between the United States (US) and Iran continue to keep investors cautious, sustaining fears of potential supply disruptions. Recent comments from the US president about reinforcing the military presence in the region have revived concerns about a possible escalation, even if no immediate action is currently expected by the market.
By contrast, Oil prices are facing downward pressure from signs of a gradual recovery in Kazakhstan’s output. The country’s Energy Ministry said production at the Tengiz Oil field, the largest in Kazakhstan, is preparing to resume following recent outages. Although some operational constraints remain and logistics have not yet fully normalized, this development reinforces concerns about a return to a more supply-heavy global Oil market.
Against this backdrop, WTI prices remain caught between short-term support from supply disruptions and more structural factors pointing to a gradual restoration of production capacity. Investors therefore continue to navigate a highly uncertain environment, where any shift on the geopolitical front or in global output levels can quickly influence market sentiment.
Attention is now turning to the American Petroleum Institute (API) Weekly Crude Oil Stock report due later in the day, which could provide fresh clues on near-term supply-demand dynamics in the United States.
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.
