WTI consolidates around $90.50 as traders assess prospects of de-escalation in Middle East
- WTI struggles to capitalize on the overnight move up, though the downside seems limited.
- Persistent geopolitical uncertainties might continue to act as a tailwind for the black liquid.
- Inflation fears fuel hawkish Fed expectations and underpin the USD, capping the commodity.
West Texas Intermediate (WTI) Crude Oil prices consolidate during the Asian session on Thursday and hold steady around the $90.50 region, well within a three-day-old range.
Iran's foreign minister said on Wednesday that Tehran is reviewing a US proposal to end the war but has no intention of holding talks to wind down the widening Middle East conflict. Adding to this, the deployment of additional US troops in the region points to the risk of a further escalation of the conflict, which led to Wednesday's goodish move up in Crude Oil prices.
Meanwhile, energy infrastructure in Iran remains under pressure. Adding to this, the effective closure of the Strait of Hormuz keeps geopolitical risk premium in play and turns out to be another factor acting as a tailwind for the black liquid. Traders, however, seem reluctant to place aggressive bets and opt to wait for further developments in the conflict.
In the meantime, expectations that the war-driven surge in energy prices would rekindle inflation and prompt the US Federal Reserve (Fed) to adopt a more hawkish stance continue to underpin the US Dollar (USD). A further USD tends to undermine demand for USD-denominated commodities and further contributes to keeping a lid on Crude Oil prices.
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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