- WTI price could appreciate amid rising supply fears following Israel’s recent attacks on Iran-backed militant groups.
- The escalation of attacks in the Middle East is increasing the likelihood that Iran will become directly involved in the conflict.
- Oil prices may have received downward pressure following mixed manufacturing PMI data from China.
The West Texas Intermediate (WTI) oil price remains around $69.20 per barrel during Asian hours on Monday. However, crude oil prices could appreciate amid growing concerns about possible supply disruptions from the Middle East following Israel’s intensified attacks on Iranian-backed militant groups Hezbollah and the Houthis. These geopolitical tensions may raise fears of instability in the region, which could affect oil supplies and drive up prices.
Reuters reports that ANZ Research has noted that the recent escalation of attacks in the Middle East is increasing the likelihood that Iran, a significant producer and member of the Organization of the Petroleum Exporting Countries (OPEC), will become directly involved in the conflict.
Israel announced it bombed Houthi targets in Yemen on Sunday, expanding its confrontation with Iran’s allies. This action follows the assassination of Hezbollah leader Sayyed Hassan Nasrallah two days earlier, escalating the ongoing conflict in Lebanon.
Oil prices may have received downward pressure following mixed manufacturing Purchasing Managers’ Index (PMI) data from the world’s largest crude importer, China. China’s Caixin Manufacturing Purchasing Managers’ Index (PMI) fell to 49.3 in September, indicating contraction, from 50.4 in August. China’s NBS Manufacturing Purchasing Managers’ Index (PMI) improved to 49.8 in September, from 49.1 the previous month and beating the market consensus of 49.5.
Additionally, oil traders are closely monitoring recent monetary measures in China aimed at stimulating economic activity and increasing energy demand. Last week, China announced the injection of more than CNY 1 trillion in capital into its largest state-owned banks, facing multiple challenges. This substantial capital injection would mark the first of its kind since the 2008 global financial crisis.
However, crude oil prices may face challenges from Saudi Arabia’s plans to increase production later this year, along with OPEC+’s decision to increase output by 180,000 barrels per day in December. A Financial Times report, citing anonymous sources familiar with the country’s plans, indicated that Saudi Arabia is committed to resuming production on December 1, even if it results in a period of lower prices.
WTI Oil FAQs
WTI oil is a type of crude oil that is sold in international markets. WTI stands for West Texas Intermediate, one of the three main types that include Brent and Dubai crude. WTI is also known as “light” and “sweet” for 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 through the Cushing facility, considered “the pipeline junction of the world.” It is a benchmark for the oil market and the price of WTI is frequently quoted in the media.
Like all assets, supply and demand are the main factors that determine the price of WTI oil. As such, global growth can be a driver of increased demand and vice versa in the case of weak global growth. Political instability, wars and sanctions can alter supply and impact prices. The decisions of OPEC, a group of large oil-producing countries, is another key price factor. The value of the US Dollar influences the price of WTI crude oil, as oil is primarily traded in US dollars, so a weaker Dollar can make oil more affordable and vice versa.
Weekly oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) influence the price of WTI oil. Changes in inventories reflect the fluctuation of supply and demand. If the data shows a decline in inventories, it may indicate an increase in demand, which would drive up the price of oil. An increase in inventories can reflect an increase in supply, which drives down prices. The API report is published every Tuesday and the EIA report the next day. Their results are usually similar, with a difference of 1% between them 75% of the time. EIA data is considered more reliable since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 13 oil-producing nations that collectively decide member countries’ production quotas at biannual meetings. Their decisions often influence WTI oil prices. When OPEC decides to reduce quotas, it can restrict supply and drive up oil prices. When OPEC increases production, the opposite effect occurs. OPEC+ is an expanded group that includes ten other non-OPEC member countries, including Russia.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
