West Texas Intermediate (WTI) US Oil trades around $61.90 on Monday at the time of writing, down 5.50% on the day. WTI prices remain under pressure as markets react to signs of easing tensions between the United States (US) and Iran, which could alter supply expectations in the global energy market.
Sentiment deteriorated after comments from US President Donald Trump, who said on Sunday that the United States hopes to reach a deal with Iran. These remarks come against a backdrop of regional tensions, after Iran’s Supreme Leader Ayatollah Ali Khamenei warned that a US attack could trigger a broader conflict. For investors, the prospect of an agreement with Iran, one of the main producers within the Organization of the Petroleum Exporting Countries (OPEC), could pave the way for a relaxation of sanctions and, eventually, an increase in Crude Oil supply, weighing on WTI prices.
At the same time, the Organization of the Petroleum Exporting Countries and its allies (OPEC+), confirmed on Sunday its decision to keep output unchanged for March. The group also announced that its next meeting will take place on March 1. This decision follows the earlier freeze of planned production increases, reflecting expectations of seasonally weaker demand in the coming months. While this supply discipline aims to support market stability, it has not been enough to offset the negative impact of recent geopolitical developments.
Traders are now turning their attention to upcoming US Oil inventory data, with the American Petroleum Institute (API) report due on Tuesday.
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.