- The price of WTI jumps to about $ 74,80 in the Asian session on Monday.
- Concerns that energy supplies from the Middle East can be interrupted boost the price of WTI.
- The expectation of a lower demand could limit the upward potential of the WTI.
The West Texas Intermediate (WTI), the referent of the US crude oil, is quoted around $ 74,80 during the Asian negotiation hours of Monday. The price of the WTI has reached the highest level since January after the United States (USA) launched direct attacks against Iran, which has generated fears of possible interruptions in the energy supplies of the Middle East, particularly through the Ormuz Strait.
The price of WTI jumps after the US entered the conflict between Israel and Iran during the weekend, with American warplanes and submarines attacking three Iranian facilities in Iran, Fordo, Natanz and Isfahan. In addition, the Parliament of Iran has voted to close the Ormuz Strait in retaliation for Trump’s attack to the country.
A fifth of world oil consumption passes through the Ormuz Strait, an exit door from the Persian Gulf. JP Morgan analysts predict that the price of oil could increase to $ 130 if a prolonged war in the Middle East blocks the Ormuz Strait.
Petroleum operators will be attentive to how they will respond to the US attacks by Iran’s Foreign Minister said on Sunday that the Islamic Republic reserves “all options” to defend their sovereignty. Concerns that energy supplies from the Middle East can be interrupted could weigh on black gold in the short term.
On the other hand, the estimation of a lower demand could limit the upward potential of the WTI. In its monthly oil report last week, the International Energy Agency (IEE) reviewed its world demand estimation in 20,000 barrels per day compared to last month’s forecast and increased supply estimation in 200,000 BPD to 1.8 million BPD.
WTI FAQS oil
WTI oil is a type of crude oil that is sold in international markets. WTI are the acronym of West Texas Intermediate, one of the three main types that include the Brent and Dubai’s crude. The WTI is also known as “light” and “sweet” by its relatively low gravity and sulfur content, respectively. It is considered high quality oil that is easily refined. It is obtained in the United States and is distributed through the Cushing Center, considered “the crossing of the world.” It is a reference for the oil market and the price of WTI is frequently traded 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 the increase in demand and vice versa in the case of weak global growth. Political instability, wars and sanctions can alter the offer and have an impact on prices. OPEC decisions, 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, since oil is mainly traded in US dollars, so a weaker dollar can make oil more affordable and vice versa.
Weekly reports on oil inventories 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 show a decrease in inventories, it can indicate an increase in demand, which would raise the price of oil. An increase in inventories may reflect an increase in supply, which makes prices lower. The API report is published every Tuesday and that of the EIA the next day. Their results are usually similar, with a 1% difference between them 75% of the time. EIA data is considered more reliable, since it is a government agency.
The OPEC (Organization of Petroleum Exporting Countries) is a group of 13 nations oil producing that collectively decide the production quotas of member countries in biannual meetings. Their decisions usually influence WTI oil prices. When OPEC decides to reduce fees, it can restrict the supply and raise oil prices. When OPEC increases production, the opposite effect occurs. The OPEC+ is an expanded group that includes another ten non -members of the OPEC, among which Russia stands out.
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.
