WTI holds steady near $64.50 on easing risk in Middle East
- WTI price trades flat around $64.50 in Monday’s Asian session.
- Israel-Iran ceasefire and the prospect of more OPEC+ supply weigh on the WTI price.
- OPEC+ is set to raise August output by another 411,000 bpd.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $64.50 during the Asian trading hours on Monday. The WTI price trades on a flat note amid an easing of geopolitical tensions in the Middle East and the prospect of another OPEC+ output hike in August.
The Israel-Iran ceasefire eases geopolitical risks in the Middle East as investors expect a truce between both countries will reduce the risk of oil supply disruptions in the region. This, in turn, could drag the WTI lower in the near term. The market has stripped out most of the geopolitical risk premium built into the price following the Iran-Israel ceasefire, said IG markets analyst Tony Sycamore.
The Organization of the Petroleum Exporting Countries and its allies (OPEC+) said the group was set to boost production by 411,000 barrels per day in August, following similar-size output increases for May, June and July. OPEC+ is scheduled to meet on July 6, and this would be the fifth monthly hike since the group started unwinding production cuts in April.
However, the upbeat Chinese economic data might provide some support to the black gold, as China is the world's second-largest consumer of oil and gas. Data released on Monday showed that China’s official Manufacturing Purchasing Managers' Index (PMI) rose to 49.7 in June versus 49.5 prior. This figure came in line with the market consensus. Meanwhile, the NBS Non-Manufacturing PMI climbed to 50.5 in June, compared to May’s 50.3 and the 50.3 expected.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of 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 via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US 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) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.