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WTI rises above $78.00 as Middle East conflict disrupts supplies

  • WTI price climbs to near $78.10 in Friday’s early Asian session. 
  • A widening conflict between the US, Israel, and Iran severely disrupts global energy supplies, boosting the WTI price. 
  • The EIA reported a 3.475 million barrel build last week.

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $78.10 during the early Asian trading hours on Friday. The WTI gains momentum following an 8.5% single-day gain, the largest since 2020. The rally of black gold is bolstered by an escalating conflict between the United States (US) and Iran. 

Growing disruption to global oil supplies caused by the US-Israeli war with Iran could boost the WTI price in the near term. Iran on Tuesday has effectively halted traffic in the Strait of Hormuz, where about one-fifth of global oil shipments pass. 

Furthermore, attacks on oil tankers continued on Thursday in the Gulf, as the Bahamas-flagged crude oil tanker Sonangol Namibe reported its hull was breached after a blast near Iraq's port of Khor al Zubair.

“Crude oil markets remained on edge as they face ongoing risks to supply following the attacks in the Middle East, and concerns are centred on the flow of supply through the Strait of Hormuz," said ANZ analysts.

On the other hand, bearish inventory reports from the Energy Information Administration (EIA) might cap the upside for the WTI. According to the EIA weekly report, crude oil stockpiles in the US for the week ending February 27 climbed by 3.475 million barrels, compared to a rise of 15.989 million barrels in the previous week. The market consensus was for 2.2 million barrels. 

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.

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Lallalit Srijandorn

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.

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