WTI trades around $70.00 after trimming gains, downside seems limited due to supply concerns
- WTI retreats from five-month high of $74.40, which was marked on Friday.
- Israel warned of a missile and drone attack from Iran following Israel's attack on Iranian sites.
- Iran withdrew from the sixth round of talks with the United States following Israel’s attack.
West Texas Intermediate (WTI) Oil price pared its daily gains after reaching a five-month high of $74.40, currently trading around $70.00 per barrel during European hours on Friday. Crude Oil prices surged due to rising concerns regarding supply disruptions. The escalating tensions in the Middle East threaten to disrupt the Strait of Hormuz, a key route for about 20% of global Oil transportation.
Israel expects a missile and drone attack from Iran following Israel's preemptive attack on dozens of Iranian sites to dismantle its nuclear program, noted by Israeli Minister of Defense, Israel Katz. Kats also declared a special state of emergency in the country, per Axios.
Moreover, White House Secretary of State Marco Rubio released a statement that “Tonight, Israel took unilateral action against Iran. We are not involved in strikes against Iran, and our top priority is protecting American forces in the region.” “Let me be clear: Iran should not target US interests or personnel,” Rubio added.
In response to the Israeli attack, Iran pulled out of the sixth round of talks between the United States (US) and Iran scheduled for Sunday, Iran International cited Aladdin Boroujerdi, a member of parliament’s National Security and Foreign Policy Commission.
Moreover, the US Energy Information Administration (EIA) released Crude Oil Stocks Change, showing a decline of 3.6 million barrels in the previous week, exceeding forecasts of a 2 million-barrel decline. The decline in Oil inventories signals strong demand.
(The story was corrected on June 13 at 07:20 GMT, to say in the title that WTI trades around $70.00, and not around $74.50.)
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
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.
