WTI Oil reversal stalls above $91.00 as Middle East tensions outweigh supply increases

WTI Oil consolidates between $91.00 and $92.00 after retreating from weekly highs near $96.00.
News that Gulf countriies have boosted Oil exports in September has contributed to lower prices.
Middle East tensions remain high with the conflict going through an uncertain period, which keeps Crude prices from depreciating further.

The price of the US benchmark West Texas Intermediate (WTI) barrel has stabilised above $91.00 on Friday, with the reversal from Thursday’s highs, near $96.00, losing momentum. Ongoing hopes that the US-Iran contacts will bear fruit and news that Saudi Arabia has boosted exports through the Strait of Hormuz have cheered investors, but recent attacks by the Iran-backed Houthis from Yemen are keeping Cride Prices supported.

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A report by Bloomberg released on Thursday revealed that exports of Saudi Oil through the Strait of Hormuz surged to a wartime peak of more than 5 million barrels a day so far in September, up from 3.4 million barrels in August and 4.5 million in July.

Bloomberg sources also affirmed that Iraq, Kuwait and the United Arab Emirates (UAE) have been shipping Oil out of the Gulf using vessels with their transponders off, altogether increasing supply in global markets and easing concerns about disruptions.

Iran presents new seven-day ceasefire proposal

Beyond that, news that US-Iran talks to negotiate a peace agreement remain underground is feeding hopes of a negotiated end of the war. The Financial Times affirmed on Friday that Tehran has offered a new seven-day ceasefire proposal which would include the implementation of the Memorandum of Understanding (MoU) signed in June and the reopening of the Strait of Hormuz.

Uncertainty, however, remains at high levels, especially after Saudi Arabian authorities reported the interception of a new wave of missiles launched by the Houthis from Yemen. Concerns that one such attack might damage Saudi oilfields again are likely to keep Crude prices from retreating faster.

US data released earlier this week revealed that commercial Oil stockpiles increased by 2.96 million barrels in the week off September 19, against market expectations of a 700K withdrawal and following a 640K decline in the previous week. This has contributed to keeping a cap in the Oil rally seen earlier in the week.

WTI Oil FAQs

What is WTI Oil?

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.

What factors drive the price of WTI Oil?

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.

How does inventory data impact the price of WTI Oil

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.

How does OPEC influence the price of WTI Oil?

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.

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