WTI drops to two-week low below $71.00 on easing fears of oil supply disruption

• WTI price loses ground to around $70.70 in Thursday’s early Asian session. 
• Easing fears of an oil supply disruption in the Middle East, sluggish global oil demand outlook weigh on the WTI price. 
• Any positive development surrounding more Chinese fresh stimulus plans could cap the WTI’s downside. 

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $70.70 on Thursday. The WTI price edges lower after selling off on reports that Israel will not attack Iran’s oil facilities.

Israel told the United States that a planned retaliatory attack on Iran won’t target nuclear and oil facilities, according to senior Biden administration officials, a promise sought by the White House to head off further Middle East escalation and to avoid a potential oil price increase, per the Wall Street Journal. Traders will closely watch the developments surrounding the geopolitical tensions in the Middle East. Any signs of escalation could lift the WTI price. 

US crude oil inventories rose more than expected last week. According to the American Petroleum Institute (API), crude oil stockpiles in the United States for the week ending October 11 fell by 1.58 million barrels, compared to a rise of 10.9 million barrels in the previous week. The market consensus estimated that stocks would increase by 2.3 million barrels.

The Organisation of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (EIA) this week cut their 2024 global oil demand growth forecasts. The IEA estimated global oil demand to grow 1.2 million barrels per day to 104.3 million bpd next year, about 300,000 bpd below prior forecasts. Furthermore, stimulus measures in China fail to boost the black gold price. 

"On the top of every ardent bear's wish list are a stuttering Chinese economy, relative calm in the Near East, and downward revisions in global oil demand growth. These wishes were granted at the beginning of the week," noted Tamas Varga, an analyst at TP ICAP.

The Chinese officials will hold a joint briefing at 2.00 GMT on Thursday on potential measures to support the economy. Additional fresh stimulus plans from China, the top largest consumer of oil in the world, could provide some support to the WTI price in the near term. 

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.