During Asian trading hours on Monday, West Texas Intermediate (WTI), the US crude oil benchmark, is trading at around $86.70. The price of WTI is rising amid renewed tensions between the United States (US) and Iran in the Strait of Hormuz. Traders are preparing for a report from the American Petroleum Institute (API) that will be released later on Tuesday.
According to Bloomberg, Iran’s military said the United States (US) violated the ceasefire by firing on one of Iran’s merchant ships. Iran has stated that it will soon respond and retaliate against this naval and military attack by the US military.
Iran on Sunday denied it would take part in novel peace talks with the US, hours after US President Donald Trump said his negotiators would travel to Pakistan on Monday for a second round of peace talks with Iran. Fear of supply disruptions may drive up the price of WTI in the near future.
Traders are preparing for the release of the API report on Tuesday. A larger-than-expected decline in crude oil inventories indicates stronger demand and could push up the price of WTI, while a larger-than-expected decline signals weaker demand or excess supply, which could weigh on the price of WTI.
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, feeble 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.
