WTI rises above $67.00 on geopolitical risks, Fed rate decision might cap gains
- WTI price drifts higher to $67.20 in Thursday’s early Asian session.
- The Israeli military resumed ground operations in central and southern Gaza, underpinning the WTI price.
- Crude oil stockpiles in the US rose by 1.745 million barrels last week, according to the EIA.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $67.20 during the early Asian session on Thursday. The WTI price edges higher amid the ongoing geopolitical tensions in the Middle East. However, the Federal Reserve's (Fed) decision to hold interest rates steady might cap the upside for WTI price.
The Israeli military resumed ground operations in the central and southern Gaza Strip. US President Donald Trump threatened to continue his country’s attack on Yemen's Houthis and said he would hold Iran responsible for any attacks carried out by the group that has disrupted shipping in the Red Sea. The Red Sea disruption has caused an increase in energy transportation prices and the WTI price since oil and gas cargo shipments have been forced to take longer routes.
"Traders are being forced to refocus on Mideast geopolitical risks as Israel and the United States launch attacks on Gaza and Yemen, respectively," said Clay Seigle, senior fellow for energy security at the Center for Strategic and International Studies.
Crude Oil inventories climbed last week. The US Energy Information Administration (EIA) weekly report showed crude oil stockpiles in the United States for the week ending March 14 rose by 1.745 million barrels, compared to an increase of 1.448 million barrels in the previous week. The market consensus estimated that stocks would increase by 1.17 million barrels.
The US Federal Reserve (Fed) held rates steady at the 4.25%-4.50% range at the March meeting on Wednesday, as widely anticipated. Nonetheless, Fed officials still see reducing borrowing costs by half a percentage point by the end of this year due to slowing economic growth and a downturn in inflation. This, in turn, raises concerns about slower energy demand and weighs on 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 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
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.
