WTI Oil rushes above $90.00 as tensions in the Middle East grow
- WTI Oil accelerates its recovery and reaches session highs near $91.00, nearly 3% up on the day.
- Attacks by Houthi militias on Saudi airports have boosted fears about an escalation of the conflict.
- An increase in attacks on oil vessels is pushing transport costs higher.
Crude Oil is trading higher on Thursday following reports of new attacks on Saudi Arabian airports by Iran-backed Houthi militias. The price of the US benchmark West Texas Intermediate (WTI) Oil barrel has returned above the $90.00 line and is nearing intra-week highs, at $90.87 at the time of writing.
A fresh wave of attacks on Saudi Arabian airports has killed three people, according to reports by the Saudi aviation authority. These attacks come as retaliation for Saudi support to the Yemeni government's offensive against the Houthis and threaten to escalate the conflict in the region, which will likely lead to Crude supply constraints.
Attacks on vessels boost shipping costs
Beyond that, the UK Maritime Trade Operations (UKMTO) has reported an increase in attacks on vessels in the Strait of Hormuz, as the nine attacks so far in October represent half of the incidents registered in September. This has pushed transport costs higher as companies raise hiring rates for supertankers, boosting Crude prices.
In the US, data released by the Energy Information Administration (EIA) on Wednesday revealed that Crude Oil stocks declined beyond expectations in the last week of September, providing a further impulse to prices.
The EIA reported a 3.186 million-barrel drawdown in the week ending on October 2, well beyond the 1.9 million-barrel decline and following a 922K build-up in the previous week. The report also said that Crude imports fell by 53,000 barrels per day (bpd) on the week, while exports rose by 1.2 bpd to 4.7 million bpd.
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.