WTI slides to near $96 as US Dollar strengthens, eyes on Middle East tensions

WTI price tumbles to near $96.00 in Thursday’s early European session.
A stronger US Dollar and a rise in crude oil inventories weigh on the WTI price.
Rising tensions in the Middle East after the gas field strike could boost the WTI price.

Lallalit Srijandorn FXStreet

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $96.00 during the early European trading hours on Thursday. The WTI price falls amid renewed US Dollar (USD) demand. Traders will closely monitor the situation in the Middle East as US President Donald Trump threatens a strike on Iran's gas field if Qatar is attacked again.

The US Federal Reserve (Fed) on Wednesday decided to maintain its target range for the federal funds rate at 3.50-3.75%, as widely expected. During the press conference, Fed Chair Jerome Powell said, “The forecast is that we will be making progress on inflation, not as much as we had hoped, but some progress on inflation.”

He further stated that surging oil prices due to the Iran war are expected to increase inflation in the near term. A hawkish tone from the Fed lifts the Greenback and weighs on the USD-denominated commodity price.

A significant surge in US crude oil inventories might contribute to the WTI’s downside. According to the US Energy Information Administration (EIA) weekly report, crude oil stockpiles in the US for the week ending March 13 climbed by 6.156 million barrels, compared to a rise of 3.824 million barrels in the previous week. The market consensus was for an increase of 400,000 barrels.

On the other hand, escalating conflict in the Middle East and attacks on critical energy infrastructure could boost the WTI price in the near term. Israel carried out airstrikes on Iran's South Pars, the world's largest gas field, causing significant damage. Iran retaliated with missile strikes on Qatar’s Ras Laffan industrial site and has threatened facilities in Saudi Arabia and the United Arab Emirates (UAE).

US President Donald Trump warned that if Iran strikes Qatar again, the US "will massively blow up the entirety of the South Pars Gas Field at an amount of strength and power that Iran has never seen or witnessed before.”

WTI Oil FAQs

What is WTI Oil?

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.

What factors drive the price of WTI Oil?

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.

How does inventory data impact the price of WTI Oil

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.

How does OPEC influence the price of WTI Oil?

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.

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