At the time of writing, West Texas Intermediate (WTI) US Oil is trading at around $95.30, virtually unchanged on the day as markets balance supply easing measures with rising geopolitical risks in the Middle East.
Oil prices showed volatility after Australian Energy Minister Chris Bowen announced the country would release up to 762 million liters of the fuel from its strategic reserves. The move involves a ephemeral easing of stockpile rules, allowing for a reduction of up to 20% in minimum fuel storage requirements to aid ease supply disruptions related to the war with Iran.
Japan also announced plans to release about 80 million barrels of oil from its strategic reserves, equivalent to about 45 days of supply. The action is expected to start on Monday and will be coordinated with the G7 and the International Energy Agency (IEA). Japan relies heavily on energy imports from the Middle East, with approximately 95% of its oil coming from the region and almost 90% of its supplies passing through the Strait of Hormuz.
Despite efforts to stabilize the market, supply risks remain elevated. Escalating tensions involving the United States (US), Israel and Iran have effectively closed the Strait of Hormuz, a critical bottleneck for global oil supplies.
The IEA estimates supply disruptions could reach at least 8 million barrels per day, marking one of the largest supply disruptions ever recorded in the global oil market. In response, IEA industrial countries announced the release of a record amount of approximately 400 million barrels from emergency reserves to aid cushion the shock.
However, Commerzbank analysts warn that such a release of reserves brings only ephemeral relief. According to the bank, even if spread over several months, this measure will only partially compensate for supply losses if the Strait of Hormuz remains completely closed.
In this context, the oil market will likely continue to be driven mainly by geopolitical events. Several institutions note that as long as the conflict persists and risks to key energy transport routes remain high, oil prices should continue to find sturdy fundamental support.
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 following 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.
