WTI rises to near $68.50 due to output disruptions in the US Gulf of Mexico
- WTI price appreciated as Hurricane Francine caused output disruptions in the US Gulf of Mexico.
- Official data showed that nearly 42% of US Gulf of Mexico’s Oil production had been shut in as of Thursday.
- Both OPEC and IEA have lowered their forecasts for Oil demand growth, citing economic challenges in China.
West Texas Intermediate (WTI) Oil price holds gains for the third consecutive day, trading around $68.50 during the Asian session on Friday. The rise in crude Oil prices is driven by Hurricane Francine, which forced producers to evacuate platforms ahead of its impact on the Louisiana coast on Wednesday, causing output disruptions in the US Gulf of Mexico.
On Thursday, Oil producers conducted damage assessments and safety checks in preparation to resume operations in the US Gulf of Mexico. According to Reuters, UBS analysts projected that Oil output in the region for September would decrease by 50,000 barrels per day (bpd) compared to the previous month. Meanwhile, FGE analysts estimated a larger drop of 60,000 bpd, bringing total output to 1.69 million bpd. Official reports indicated that nearly 42% of the region's Oil production had been shut in as of Thursday.
This week, both the Organization of Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) lowered their forecasts for Oil demand growth, attributing the revision to economic challenges in China, the world's largest Oil importer. Additionally, speakers at the APPEC conference highlighted that China's transition toward lower-carbon fuels is also dampening its Oil demand.
China's crude Oil imports averaged 3.1% lower from January through August this year compared to the same period last year, according to customs data released on Tuesday. In addition to concerns about China, demand worries have also intensified in the United States. US gasoline and distillate futures hit multi-year lows this week, with analysts pointing to weaker-than-expected demand in the world's top petroleum-consuming country.
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
Akhtar Faruqui
FXStreet
Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.
