WTI edges lower below $65.00 as traders brace for OPEC+ decision
- WTI price trades in negative territory in Wednesday’s early Asian session.
- Traders will closely watch Iran's nuclear program and the potential supply interruptions.
- Surprise crude oil inventory build ended five-week draw streak.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $64.85 during the early Asian trading hours on Wednesday. The WTI price drifts lower as investors assess the developments surrounding geopolitical risks in the Middle East. Meanwhile, traders await cautiously ahead of an OPEC+ meeting to decide the group's August output policy.
US officials said that Iran was prepped to mine the Strait of Hormuz last month after Israeli strikes, but the mines were never deployed, per Reuters. Oil traders will closely monitor whether Iran’s inventories of near-bomb-grade uranium have been depleted and whether its moves to cut off communication with key United Nations (UN) watchdog officials would spark another round of US attacks.
US President Donald Trump stated that the US will “be there” unless Iran gives up its nuclear program. Any signs of escalation could prompt fears of oil supply disruption and might underpin the WTI price.
On the other hand, a surprise crude oil inventory build last week weighs on the WTI price. The American Petroleum Institute (API) weekly report showed crude oil stockpiles in the US for the week ending June 27 unexpectedly increased by 680,000 barrels, compared to a fall of 4.277 million barrels in the previous week. The market consensus estimated that stocks would decline by 2.26 million barrels. So far this year, crude oil inventories are up 4.0 million barrels, according to Oilprice calculations of API data.
Oil traders will keep an eye on the US ADP Employment Change report for June, along with the US Energy Information Administration (EIA) Crude Oil Stockpiles report, which are due later on Wednesday.
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.