- WTI price jumps above $78.00 in early Asian trading on Thursday.
- Rising tensions in the Middle East and falling US inventories boost WTI prices.
- Weaker demand in China could limit WTI’s upside.
West Texas Intermediate (WTI), the benchmark for US crude oil, is trading around $78.00 on Thursday. The price of WTI is rising amid fears of heightened geopolitical risks following the assassination of a Hamas leader in Iran and a sharp drop in US crude inventories.
Oil traders assessed the impact following the assassination of a Hamas leader in Iran. Ismail Haniyeh was killed in Iran’s capital after attending the inauguration of the new president, the militant group said. Iranian officials and Hamas have blamed Israel for the attack that killed Haniyeh, according to CBS News. This headline raises concerns about an unstable oil supply, which underpins the price of WTI.
“Overnight developments and elevated geopolitical risk are only providing temporary respite for oil benchmarks. Unless oil and gas infrastructure is hit, the latest surge is unlikely to last,” Gaurav Sharma, an independent oil analyst, told Reuters.
U.S. crude oil inventories fell for a fifth straight week, the longest streak of declines since January 2021. U.S. crude oil inventories for the week ended July 26 fell by 3.436 million barrels to 433 million barrels. The market consensus was for stocks to decline by 1.6 million barrels, the Energy Information Administration (EIA) said on Wednesday. This was 1.5% lower than a year ago and 4% below their five-year average.
Moreover, the Federal Reserve (Fed) kept its key interest rate at 5.25% to 5.50% at its July meeting on Wednesday. During the press conference, Fed Chair Jerome Powell stated that a rate cut in September is “on the table,” adding that the US labor market will be closely watched. Rising expectations of rate cuts in September could weigh on the US Dollar (USD) and provide some support to the USD-denominated WTI.
On the other hand, weaker demand and a sluggish economy in China could limit WTI’s upside as China is the world’s largest oil consumer. China’s manufacturing Purchasing Managers’ Index (PMI) declined for the third month, the National Bureau of Statistics (NBS) reported on Wednesday. China’s NBS manufacturing PMI fell to 49.4 in July from 49.5 in June, falling below the threshold of 50 that separates growth from contraction. However, the figure was above the market consensus of 49.3.
WTI Oil FAQs
WTI crude oil is a type of crude oil sold on international markets. WTI stands for West Texas Intermediate, one of three main types that include Brent and Dubai crude. WTI is also known as “light” and “sweet” for 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 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 factors determining the price of WTI crude oil. As such, global growth can be a driver of increased demand and vice versa in the case of weak global growth. Political instability, wars and sanctions can disrupt supply and impact prices. Decisions by OPEC, a group of large oil producing countries, are another key driver of price. The value of the US Dollar influences the price of WTI crude oil, as oil is primarily traded in US Dollars, so a weaker 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) influence the price of WTI oil. Changes in inventories reflect fluctuations in supply and demand. If the data show a decrease in inventories, it may indicate an increase in demand, which would push up the price of oil. An increase in inventories may reflect an increase in supply, which pushes down prices. The API report is published every Tuesday, and the EIA report the following day. Their results are usually similar, with a difference of 1% between them 75% of the time. The EIA data is considered more reliable because it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 13 oil-producing nations that collectively decide on member countries’ production quotas at biennial meetings. Their decisions often influence WTI oil prices. When OPEC decides to reduce quotas, it can restrict supply and drive up oil prices. When OPEC increases production, the opposite effect occurs. OPEC+ is an expanded group that includes ten other non-OPEC countries, most notably Russia.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
