WTI holds losses around $73.00, downside seems limited due to increased supply concerns
- WTI price may regain its ground due to heightened concerns over supply disruptions in the Strait of Hormuz.
- President Trump posted on social media, calling for Iran’s “unconditional surrender.”
- The US Fed is widely expected to keep interest rates unchanged at 4.5% on Wednesday.
West Texas Intermediate (WTI) Oil price retraces its recent gains registered in the previous session, trading around $73.00 during the Asian hours on Wednesday. However, the WTI price appreciated more than 5% on Tuesday due to heightened concerns over supply disruptions in the Strait of Hormuz, which handles about one-fifth of the world’s seaborne Oil, amid escalating Middle East tensions.
On Tuesday, US President Donald Trump posted on his social media platform, calling for Iran’s “unconditional surrender.” The US military is deploying more fighter aircraft to strengthen its presence, according to three officials. Meanwhile, Israel may intensify its attacks on Iran, while the United States (US) is considering expanding its role in the conflict.
President Trump said that he wants a permanent end to Iran's route to nuclear weapons following his early departure from the G-7 meeting in Canada. However, Tehran has reportedly urged several countries, including Oman, Qatar, and Saudi Arabia, to urge US President Donald Trump to declare an immediate ceasefire.
Traders expect the US Federal Reserve to keep its benchmark overnight interest rate in the 4.25%-4.50% range at the June meeting scheduled on Wednesday, with a nearly 80% probability of a Fed rate cut each in September and October.
However, Tony Sycamore, a market analyst at IG, said that ongoing tensions in the Middle East and the risk of slowing global growth could prompt the Fed to potentially cut rates by 25 basis points in July, earlier than the current market expectation of September, per Reuters.
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.