WTI Oil rallies above $99 as the Middle East war threatens to complicate further

WTI Oil bounces up 1.9% on Thursday to hit session highs above $99.00.
Concerns of a new escalation of the conflict and fresh attacks on Saudi oilfields have boosted crude prices.
EIA data revealed on Wednesday that US Crude Oil stocks declined well beyond expectations last week.

Oil prices bounced up strongly on Thursday as clouds gather over the Middle East conflict, resurfacing market concerns about supply restrictions. The US benchmark West Texas Intermediate (WTI) Oil appreciates about 1.9% on the day so far, trading above $99,00, amid fresh threats from Iran to the US military and speculation that Israel might enter the conflict again.

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The Iranian Islamic Revolutionary Guard Corps (IRGC) navy affirmed earlier on Thursday that Washington’s continuing insistence on pushing vessels to cross the Strait of Hormuz by routes deemed illegal might lead to attacks on US bases in the region.

The IRGC also affirmed that four vessels involved in illegal oil transfers in the Persian Gulf were hit by its forces, while three other vessels hit sea mines while attempting to cross the Hormuz sea corridor.

Saudi oilfields remain under threat

These comments follow a new drone attack by the Yemeni Houthi militias, a close ally of Tehran, on Aramco’s Shaybah Oilfield, which has reportedly killed two people and reactivated concerns about supply disruptions of Saudi Oil.

To make things worse, a report by The New York Times citing US officials affirms that the US and Israel might be planning a new round of major airstrikes on Iran, after the US mid-term elections, aimed at forcing Tehran to make concessions at the negotiating table.

On Wednesday, data released by the US Energy Information Administration (EIA) showed that commercial Oil inventories declined by 3,1 million barrels in the week ending October 16. These figures largely exceed the 800K barrel drawdown forecasted by market analysts and provides additional impulse to prices.

WTI Oil FAQs

What is WTI Oil?

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.

What factors drive the price of WTI Oil?

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.

How does inventory data impact the price of WTI Oil

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.

How does OPEC influence the price of WTI Oil?

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.

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