WTI Oil eases to levels near $95 on hopes of higher supply of Saudi Crude
- Oil prices dip to levels near $95, on track for their first weekly decline in the last three weeks.
- News of an alternative route for Saudi Oil exports has allowed for some relief on prices.
- The uncertain situation in the Middle East is keeping crude prices from retreating further.
The US benchmark West Texas Intermediate (WTI) Oil is heading for its first weekly decline in the last three weeks, as prices near the $95 level after hitting fresh four-month highs at 102.07 last Tuesday. Hopes that Saudi Arabia will increase its supply and a call from China to Iran to rein in Houthis have provided some relief to prices, although the uncertainty in the Middle East is keeping dips limited so far.
News that Saudi Arabia has found an alternative route through Oman to supply crude to Asian countries has eased some concerns about supply disruptions. These fears escalated last week after a drone attack damaged the West-East pipeline transporting Oil to the Red Sea port of Yanbu, which was used to skip the blockade of the Strait of Hormuz.
Beyond that, Reuters reported on Thursday that China has privately asked Iran to rein in Yemen’s Houthis as the Iran-backed militias seized critical coastal areas in the Red Sea last week and threatened to block the Bab el-Mandeb waterway, adding pressure on the already strained global crude supply.
Uncertainty in the Middle East keeps Crude Prices supported
The Chinese foreign ministry affirmed on Thursday that China does not want regional tensions to spill over Yemen and the Red Sea, but a series of reciprocal attacks between Saudi Arabia and the Houthis are pointing in that direction, while the US-Iran war enters a grey area.
Meanwhile, the Strait of Hormuz remains practically closed, and the UK Maritime Trade Operations (UKMTO) reported an attack on a vessel 16 nautical miles northeast of Oman’s Khasab.
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.
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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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