WTI trades around $68.50 after dropping more than 4% amid easing geopolitical tensions

• WTI loses ground due to easing geopolitical tensions in the Middle East.
• Israel's attack on missile and air defense sites in Iran proved to be less aggressive than many had anticipated.
• OPEC+ plans to roll back its production cuts in December, with aiming to boost output by 180,000 barrels per day.

West Texas Intermediate (WTI) Oil prices fell by more than 4%, trading around $68.40 during the Asian session on Monday. This decline can be linked to easing geopolitical tensions following Israel's targeted airstrikes on Iran early Saturday, which were primarily aimed at missile and air defense sites and turned out to be less aggressive than many had expected.

Israeli jets carried out three waves of strikes before dawn on Saturday, targeting missile factories and other locations near Tehran and in western Iran. Despite this, Iran has downplayed the damage, with Supreme Leader Ayatollah Ali Khamenei stating that the attack "should neither be downplayed nor exaggerated." The oil market appears to interpret the Israeli strike and Iran's response as a sign of de-escalation from the previously heightened tensions, per Reuters.

The OPEC+ group, comprising the Organization of the Petroleum Exporting Countries and allies such as Russia, is still on track to begin rolling back some of its production cuts in December, aiming to increase output by 180,000 barrels per day (bpd). This will mark the first step in a series of output increases planned for 2025.

Demand in Asia, which accounts for about two-thirds of global seaborne crude imports, has been weak throughout 2024. The October arrivals are expected to follow this trend. A significant portion of this decline can be attributed to China, the world's largest crude importer, which has experienced a drop of 350,000 bpd in crude arrivals during the first nine months of this year compared to the same period in 2023.

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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