West Texas Intermediate (WTI), the US crude oil benchmark, is trading at around $59.20 during early Asian trading hours on Monday. The price of West Texas Intermediate crude oil jumps as tensions in Iran exacerbate concerns in the oil market. Traders are preparing for the release of the American Petroleum Institute (API) crude oil inventories report on Tuesday.
US President Donald Trump is considering a series of potential military options in Iran following bloody protests in the country, CNN reported on Sunday. Trump threatened repercussions if Iranian authorities targeted civilians, while Tehran warned the United States and Israel against any interference. The situation in Iran puts nearly 2 million barrels per day of oil exports at risk of disruption, which could boost the price of WTI in the near term.
“Markets appear more focused on growing unrest in Iran amid heated rhetoric and resilient fundamentals,” said Amarpreet Singh, an analyst at Barclays.
However, the US push to attract oil companies back to Venezuela may limit the upside for the black gold. Trump said last week that Venezuela’s interim government had agreed to give up to 50 million barrels of “high-quality, sanctioned oil” to the United States. Trump added that the United States wants full access to Venezuelan oil after US forces arrested former President Nicolas Maduro over the weekend.
The API crude oil inventories report will be published on Tuesday. A larger-than-expected crude oil inventory draw indicates stronger demand and could boost the WTI price, while a larger-than-expected build indicates weak demand or oversupply, which could push the WTI price lower.
Frequently asked questions about West Texas Intermediate crude oil
West Texas Intermediate oil is a type of crude oil that is sold in international markets. WTI stands for WTI, and is one of three main types including Brent and Dubai crude. WTI is also referred to as “light” and “sweet” due to its relatively low gravity and sulfur content, respectively. It is considered a high quality oil and easy to refine. It is sourced from the United States and distributed through the Cushing Hub, considered the “pipeline crossroads of the world.” It is a benchmark for the oil market and the price of WTI is frequently quoted in the media.
Like all assets, supply and demand are the main drivers of the price of WTI. 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 affect prices. Decisions by OPEC, a group of major oil-producing countries, are another major driver of the price. The value of the US dollar affects the price of WTI, as oil is mostly traded in US dollars, so a weak US dollar can make oil more affordable and vice versa.
Weekly oil inventory reports from the American Petroleum Institute (API) and the Energy Information Agency (EIA) influence the price of WTI. Changes in inventories reflect fluctuations in supply and demand. If data shows a decline in inventories, this could indicate increased demand, leading to higher oil prices. High inventories can reflect increased supply, causing prices to fall. The API report is published every Tuesday and the EIA report the next day. Their results are usually similar, falling within 1% of each other 75% of the time. EIA data is more reliable, because it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 oil-producing countries that collectively decides production quotas for member countries at meetings held twice a year. Their decisions often affect WTI prices. When OPEC decides to cut its quotas, it can tighten supply, causing oil prices to rise. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten additional non-OPEC members, most notably Russia.
