The price of West Texas Intermediate (WTI) crude oil continues its gains for the third straight session, trading around $59.10 per barrel during Asian hours on Monday. Crude oil prices rise as supply risks increase amid escalating protests in Iran. The country exports nearly two million barrels per day and is the fourth largest producer in OPEC, making any escalation a material threat to global supplies.
The unrest has entered its third week, and has reportedly claimed hundreds of lives, with authorities signaling a tougher response. US President Donald Trump warned Tehran against using force against the demonstrators, and hinted at possible action if the crackdown escalated, while Iranian officials warned against any American or Israeli involvement.
Oil price gains may be limited by expectations of a resumption of Venezuelan exports after the ouster of President Nicolas Maduro and expectations of oversupply in the market this year. Trump said last week that Caracas was set to deliver up to 50 million barrels of sanctioned oil to the United States, according to Reuters.
Uncertainty over Venezuela’s crude oil shipments remained as US policy changes and sanctions cast a cloud over the outlook for oil flows. Trump also warned Cuba that oil and financial support for Venezuela would be cut unless Cuban leaders reach an agreement with Washington.
Meanwhile, traders are also monitoring potential supply disruptions from Russia amid ongoing Ukrainian attacks on Russian energy facilities and the potential for tougher US sanctions on Russian energy.
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.
