$97.50 breached as drone attacks on Saudi Arabia and Russia lift WTI

Energy supply disruption became an immediate concern following drone attacks on Saudi and Russian oil facilities.
By targeting Russian oil infrastructure with drones, Ukraine signalled Kyiv’s intention to disrupt Moscow’s diesel exports under the agreement between Trump and Putin.
Growing Middle Eastern exports and forthcoming Russian diesel deliveries could limit further oil price gains.

West Texas Intermediate (WTI) oil traded near $97.70 during Thursday’s Asian session. Prices ended a three-day decline as crude advanced after a drone strike on Saudi Aramco’s Shaybah oil field caused two casualties. The attack heightened Middle East geopolitical tensions and fuelled fears of possible energy supply disruptions. With safety risks increasing, the United States (US) ordered selected personnel and family members to leave American embassies in Saudi Arabia.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Beyond the Middle East, geopolitical conflict is also affecting global energy markets. This week, Russia’s critical oil infrastructure came under large-scale drone attacks launched by Ukraine. The strikes signal Kyiv’s active intention to undermine Moscow’s capacity to increase diesel exports under the recent agreement between Presidents Trump and Putin.

An expanding supply outlook among major producers could nevertheless constrain further oil price advances despite these disruption fears. Saudi Arabia’s crude exports rose 7.9% in August to their highest level since March, underscoring the recovery in Middle Eastern export flows towards prewar levels. Russia is also expected to deliver its first diesel shipment to the United States on Thursday, adding further supply to the global market.

As wider markets continue to adjust, Brown Brothers Harriman strategists describe Brent crude prices as "holding on to recent gains near $110 a barrel,". Their assessment that "bond yields are edging higher while stocks are extending their recovery," places particular focus on Europe: the "French 10-year bond yield premium over Germany is closing in on a 24-year high." Turning to currencies, BBH reports that the "USD is mixed just above yesterday’s lows, with interest rate differentials supportive of the currency." Rabobank, meanwhile, contends that the "full-fat Pax Americana being over portends more Middle East instability ahead," supporting the view that shifting geopolitical conditions could maintain an elevated risk premium across oil-linked assets.

WTI Oil: Key Questions

WTI Oil: Characteristics and Benchmark Role

Traded internationally, WTI oil is a crude grade whose name stands for West Texas Intermediate. It is one of three major grades, alongside Brent and Dubai Crude. Its relatively low gravity and sulphur content earn it the descriptions “light” and “sweet”, respectively. These characteristics make it a high-quality oil that is readily refined. Produced in the United States, WTI is distributed through the Cushing hub, known as “The Pipeline Crossroads of the World”. WTI serves as an oil market benchmark, with its price regularly cited by the media.

WTI Oil: Main Price Drivers

Supply and demand determine WTI oil prices, as they do for other assets. Stronger global growth can lift demand, while weaker growth can have the reverse effect. Supply disruptions caused by political instability, wars or sanctions can also affect prices. Another major influence is policy set by OPEC, a group of leading oil-producing countries. Because oil is traded predominantly in US Dollars, the value of the US Dollar also matters for WTI crude: a weaker currency can make oil more affordable, while a stronger one can have the opposite effect.

WTI Oil: The Impact of Inventory Reports

WTI oil prices respond to weekly inventory releases from the American Petroleum Institute (API) and the Energy Information Agency (EIA). Inventory movements indicate changes in the supply-demand balance. A decline in stocks can signal stronger demand and lift oil prices; an increase can indicate greater supply and weigh on prices. The API releases its figures every Tuesday, followed by the EIA the next day. The two reports generally produce similar results: 75% of the time, their readings are within 1% of each other. As the EIA is a government agency, its data is regarded as more reliable.

12 Oil-Producing Nations: OPEC’s Influence on WTI Prices

Production quotas for OPEC’s 12 oil-producing member nations are agreed collectively at meetings held twice a year. OPEC (Organization of the Petroleum Exporting Countries) often influences WTI oil prices through these decisions. A reduction in quotas can restrict supply and drive prices higher, while an increase in production can have the reverse effect. The wider OPEC+ group incorporates ten additional non-OPEC members, with Russia the most prominent.