WTI Oil retreats on easing Iran tensions, Venezuela exports
- WTI Oil prices pull back as geopolitical tensions surrounding Iran ease.
- A larger-than-expected rise in US Crude inventories weighs on market sentiment.
- The resumption of Venezuelan Oil exports adds further pressure on supply.
West Texas Intermediate (WTI) US Oil retreats for a second consecutive day and trades around $59.20 per barrel on Thursday at the time of writing, down 1.60% on the day. Crude Oil prices remain under pressure as concerns about a potential US military action against Iran gradually fade.
US President Donald Trump said that reports suggested a slowdown in crackdown-related violence in Iran and that no large-scale executions were planned in the near term. Although he did not fully rule out military action, these comments helped reduce the geopolitical risk premium embedded in Oil prices. According to Reuters, several market participants now believe that Washington is likely to refrain from direct intervention, limiting fears of major supply disruptions in the Middle East.
This more relaxed geopolitical backdrop is compounded by unfavorable supply-side fundamentals in the United States (US). The Energy Information Administration (EIA) weekly report showed that US Crude Oil stockpiles rose by 3.391 million barrels in the week ended January 14, compared with market expectations for a draw of around 2.2 million barrels. This unexpected build follows a sharp decline in the previous week and reinforces concerns about short-term oversupply.
In addition, Venezuela has begun rolling back some of the production cuts imposed during the US embargo period. The resumption of Oil exports, with initial cargoes already shipped, increases available supply on the global market.
Against this backdrop, traders remain highly attentive to developments in Iran. Any renewed escalation could quickly revive fears of supply disruptions and provide support to WTI Oil prices. Conversely, further signs of easing tensions, combined with elevated inventories and the gradual return of some supply to the market, could continue to cap Oil prices in the near term.
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.
Nothing in this material constitutes investment advice, personal recommendation, investment research, an offer, or a solicitation to buy or sell any financial instrument. The content has been prepared without consideration of your individual investment objectives, financial situation, or needs, and should not be treated as such.
Past performance is not a reliable indicator of future performance and/or results. Forward-looking scenarios or forecasts are not a guarantee of future performance. Actual results may differ materially from those anticipated.
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