WTI remains subdued around $67.50, pares losses as US plan for SPR purchases
- WTI price recovers some of its daily losses as the US plans to purchase Oil for its Strategic Petroleum Reserve.
- The US announced to acquisition of up to 3 million barrels for delivery by May next year.
- Oil prices declined as limited military actions reduced concerns over a potential full-scale conflict in the Middle East.
West Texas Intermediate (WTI) Oil price trims its daily losses, trading near $67.50 per barrel during Tuesday's European session. Crude Oil prices found support from the United States' (US) plan to purchase Oil for its Strategic Petroleum Reserve (SPR).
On Monday, the US announced it is looking to acquire up to 3 million barrels for delivery by May next year. This purchase could exhaust the remaining funds available for SPR replenishment until further funding is approved by Congress, per Reuters.
Oil prices have dropped significantly as limited military actions have eased concerns about a potential full-scale conflict in the Middle East. Iran's Foreign Ministry spokesperson, Esmaeil Baghaei, hinted at the possibility of using "all available tools" in response to recent Israeli strikes on Iranian military targets.
ING Economics analysts noted in a report, "The targeted response from Israel does leave the door open for de-escalation, which would allow market fundamentals to become the primary driver once again," adding that fundamentals are projected to remain bearish through 2025.
The OPEC+ alliance, which includes the Organization of the Petroleum Exporting Countries and partners like Russia, remains set to start easing its production cuts in December, targeting an increase of 180,000 barrels per day (bpd). This adjustment marks the first phase in a series of planned output increases for 2025.
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.