The price of West Texas Intermediate (WTI) crude oil rose by more than 0.5%, reaching around $64.50 per troy ounce in Europe early Wednesday morning. Oil prices are rising amid continuing supply concerns related to escalating tensions between the United States (US) and Iran.
Reuters cited reports indicating that Washington may consider intercepting ships carrying Iranian crude oil and deploying an additional carrier strike group if negotiations over Iran’s nuclear program break down. While initial talks last week were constructive, traders remain wary that a breakdown in discussions could trigger US strikes on Tehran, threatening Iran’s oil exports or provoking retaliatory action.
Oil prices are further supported by rising demand from India as refineries cut purchases of Russian crude to advance a trade deal with Washington, boosting imports from the Middle East and West Africa.
Oil prices, however, may face downward pressure after a report from the American Petroleum Institute (API) showed a surge in inventories, with weekly crude stocks rising by 13.4 million barrels in the week ending Feb. 6, the biggest escalate since November 2023. That far exceeded estimates in a Reuters poll that predicted an average gain of about 800,000 barrels last week. Traders now await the official weekly inventory data, which will be released on Wednesday by the U.S. Energy Information Administration (EIA).
Market participants are also focused on today’s monthly market forecasts from OPEC (Organization of the Petroleum Exporting Countries), followed by Thursday’s report from the International Energy Agency (IEA). The IEA warned that supply is likely to exceed demand this year, which could lead to a significant surplus.
Frequently asked questions about WTI crude oil
WTI Oil is a type of crude oil sold on international markets. WTI stands for West Texas Intermediate, one of three main types, including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” due to its relatively low weight and low sulfur content. It is considered a high-quality oil that can be easily refined. It originates in the United States and is distributed through the Cushing Junction, considered the “Crossroads of the World.” It is a reference point for the crude oil market, and the WTI price is often quoted in the media.
Like all assets, supply and demand are key factors influencing the price of WTI crude oil. Therefore, global growth may drive increased demand and, conversely, frail global growth. Political instability, wars and sanctions can disrupt supply and affect prices. Another key factor shaping prices are the decisions of OPEC, the group of major oil-producing countries. The value of the US dollar affects the price of WTI crude oil because oil is mainly sold in US dollars, so a weaker US dollar can make oil more affordable and vice versa.
Weekly crude oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Administration (EIA) influence the price of WTI crude oil. Inventory changes reflect fluctuations in supply and demand. If the data shows a decline in inventories, it may indicate increased demand, which will result in an escalate in the price of oil. Higher inventories may reflect increased supply, which causes prices to fall. The API report is published every Tuesday and the EIA report the next day. Their results are usually similar and are within 1% of each other 75% of the time. EIA data is considered more reliable because it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 oil-producing countries that jointly decide on production quotas for member countries at meetings held twice a year. Their decisions often influence the prices of WTI crude oil. When OPEC decides to cut quotas, it can tighten supply, which will push up oil prices. OPEC increasing production has the opposite effect. OPEC+ refers to an expanded group that includes ten additional non-OPEC members, the most notable of which is Russia.
