WTI climbs above $73.50 as Trump urges Iran’s unconditional surrender
- WTI price gains momentum to near $73.55 in Wednesday’s early Asian session.
- Trump threatens Iran’s leader, calling for unconditional surrender.
- US crude oil inventories fell sharply by 10.133 million barrels in the week ended June 13, according to the API.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $73.55 during the Asian trading hours on Wednesday. The WTI price extends the rally as the Middle East tensions escalate and the likelihood of the United States (US) involving the conflict increases.
US President Donald Trump posted on his social media platform, calling for Iran’s “unconditional surrender.” The fears that the US will be involved in the conflict amid escalating tensions between Israel and Iran lift the WTI price. Additionally, a senior commander stated on Saturday that Iran, a major producer of oil, is considering shutting down the Strait of Hormuz. This, in turn, could drive up prices for crude oil in the near term.
The American Petroleum Institute (API) weekly report showed crude oil stockpiles in the US for the week ending June 13 fell sharply by 10.133 million barrels, compared to a decline of 370,000 barrels in the previous week. The market consensus estimated that stocks would decrease by 600,000 barrels. So far this year, crude oil inventories are up 7.6 million barrels, according to oil price calculations of API data.
On the other hand, expectations of lower demand might cap the upside for the WTI. In its monthly oil report on Tuesday, the International Energy Agency (EIA) revised its world oil demand estimate downwards by 20,000 barrels per day from last month's forecast and increased the supply estimate by 200,000 bpd to 1.8 million bpd.
Oil traders will keep an eye on the US Federal Reserve (Fed) interest rate decision later on Wednesday, which is expected to keep interest rates steady at its June meeting. Futures markets expect two rate cuts by year-end, possibly beginning in September. Also, the EIA Crude Oil stockpiles report will be published.
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.
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