West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $60.35 during Asian trading hours on Thursday. The price of West Texas Intermediate crude oil rose amid ongoing tensions in Iran. Traders will be closely monitoring the latest geopolitical developments surrounding the Iranian civil unrest.
US President Donald Trump had previously threatened to take “very strong measures” against the Islamic Republic if it executed the demonstrators. Bloomberg reported on Wednesday that the United States had transferred military personnel, and the Iranian government had warned neighboring countries not to assist in the attack. Fears of US military action against Iran and concerns about possible oil production disruptions in Iran could boost the price of WTI in the near term.
On the other hand, any signs of easing tensions in Iran may limit the downside for the WTI price. Trump said early Thursday that Iran “has no plan to carry out executions,” amid concerns for the fate of a detained anti-government protester. However, Trump refused to take military action off the table, saying his administration would wait and see.
US crude inventories are witnessing a significant increase in US crude inventories. According to the Energy Information Administration (EIA) weekly report, US crude oil inventories for the week ending January 14 rose by 3.391 million barrels, compared to a decline of 3.831 million barrels in the previous week. Market consensus estimates that inventories will fall by 2.2 million barrels.
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.
