WTI drifts lower below $65.00 after Israel agrees to Iran ceasefire
- WTI price loses ground to near $64.90 in Wednesday’s Asian session.
- Expectations Israel-Iran ceasefire will reduce the risk of oil supply disruptions in the Middle East weigh on the WTI price.
- US crude oil inventories declined by 4.277 million barrels in the week ended June 20, according to the API.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $64.90 during the Asian trading hours on Wednesday. The WTI price tumbles to a two-week low near $64.75 after Israel agrees to a ceasefire with Iran after nearly two weeks of conflict.
The WTI price edges lower after news of the ceasefire between Israel and Iran. Investors expect a truce between both countries will reduce the risk of oil supply disruptions in the Middle East. "If the ceasefire is followed as announced, investors might expect the return to normalcy in oil," said Priyanka Sachdeva, senior market analyst at Phillip Nova.
US Crude Oil Inventories saw another sharp draw last week. The American Petroleum Institute (API) weekly report showed crude oil stockpiles in the US for the week ending June 20 declined by 4.277 million barrels, compared to a fall of 10.133 million barrels in the previous week. So far this year, crude oil inventories are up 3.3 million barrels, according to oil price calculations of API data.
Oi traders will closely monitor the developments surrounding the Israel-Iran conflict. Any signs of renewed escalation could raise the fears of oil global supplies, which might boost the WTI price. The weekly crude oil stock from the US Energy Information Administration will be published 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.