U.S. West Texas Intermediate (WTI) crude rallied again on Thursday, pushed to an all-time low by a combination of the potential for a acute pullback in U.S.-Iran tensions and growing skepticism about the possibility of a “wave of demand” from China that energy conglomerates have been counting on for years.
The International Energy Agency (IEA) was reluctantly forced to cut its forecast for global oil demand on Thursday, citing smaller-than-expected demand growth in Asian segments and a still high surplus overhang, even after short-lived concerns about January restrictions on barrel deals.
The easing of tensions is combined with unsatisfactory demand, which causes barrel prices to fall
US President Donald Trump and Iran’s Ali Khamenei are nearing an agreement that could end ever-rising tensions in the Middle East between the two hot-headed world leaders, according to statements by Israeli President Benjamin Netanyahu. Oil market investors have significantly reduced their bets on WTI, which is now down more than 3.5% from its opening day at the time of writing. WTI barrel prices are rapidly approaching the major $62.00 level, which is conveniently close to the 200-day exponential moving average (EMA).
WTI daily chart
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, faint 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.
