WTI holds gains near $70.00 after three days of losses
- WTI may drop further as US-Iran peace progress boosts global crude supply.
- About 20 million oil barrels exited the Strait in 24 hours, signaling a return to normal shipping flows.
- Traders are aggressively selling positions to unload the impending flood of Middle Eastern oil.
West Texas Intermediate (WTI) oil price gains ground to trade around $69.90 per barrel during Asian hours on Thursday, snapping a three-day losing streak. However, crude oil prices faced challenges as the breakthrough progress in United States (US)-Iran peace efforts has significantly improved the global crude supply outlook.
Growing diplomatic confidence has already eased shipping anxieties, encouraging more oil tankers to transit the critical Strait of Hormuz with their tracking signals turned on. At the Reuters Global Energy Forum in New York, US Energy Secretary Chris Wright noted that roughly 20 million barrels of oil exited the Strait within a 24-hour window, characterizing the heavy shipments as a return to normal operational flows.
Shipping data supported this, showing three previously stranded tankers carrying 5 million barrels of crude finally exiting the Gulf on Wednesday due to the interim deal. Furthermore, a temporary US waiver allowing the purchase of already-loaded Iranian oil is expected to inject even more supply into the market.
This sudden influx of actual and anticipated oil has triggered a rapid sell-off in the futures market. Bob Yawger, the director of energy futures at Mizuho, observed that traders are aggressively selling off the impending flood of Middle Eastern oil and rushing to unload their positions. Yawger emphasized that the market is seeing a high concentration of selling volume specifically for the upcoming August contract delivery period as participants quickly adjust to the reality of higher supplies.
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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