Key Takeaways
- West Texas Intermediate (WTI) crude oil is trading near $60.00 amidst rising US crude inventories.
- A significant build-up of 6.5 million barrels in US crude stockpiles, reported by the API, is pressuring WTI prices.
- Traders await the upcoming EIA crude oil stockpiles report for further market direction.
- Geopolitical tensions, particularly attacks on Russian oil infrastructure, could provide support to WTI prices.
- Reported strikes on refineries in Nizhny Novgorod and other locations highlight potential supply disruptions.
WTI Oil Faces Downward Pressure Amid Inventory Surges
West Texas Intermediate (WTI), the benchmark for US crude oil, is currently trading around the $60.00 mark during Asian trading sessions. This downward movement is largely attributed to a substantial increase in US crude oil inventories, a key factor traders are closely monitoring.
💡 The upcoming release of the US Energy Information Administration (EIA) crude oil stockpiles report later today is a critical event for market participants seeking further clarity on supply dynamics.
Data released by the American Petroleum Institute (API) on Tuesday painted a concerning picture for oil bulls. The report indicated a significant surge of 6.5 million barrels in US crude oil stockpiles for the week ending October 31. This contrasts sharply with a decrease of 4 million barrels recorded in the preceding week.
📊 According to calculations based on API data, US crude oil inventories have seen a net increase of 3.6 million barrels year-to-date. This sustained build-up in supply is exerting downward pressure on WTI prices.
Geopolitical Risks Could Offer Price Support
Despite the bearish signal from inventory data, geopolitical risks are emerging as a potential factor to limit further losses for WTI. Traders are keeping a close eye on developments concerning attacks on Russian energy infrastructure, especially following Ukrainian President Volodymyr Zelenskiy’s announcement of an intensified campaign late last month.
⚡ Kyiv has claimed responsibility for a strike on Lukoil PJSC’s refinery located in Nizhny Novgorod province. This facility processes approximately 340,000 barrels of crude per day, primarily for domestic consumption.
📌 In addition to the Nizhny Novgorod refinery, Ukrainian forces have reportedly targeted oil plants in Tuapse and Saratov over the past week. Any perceived escalation in these geopolitical tensions could provide an upward catalyst for WTI prices.
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.
Final Thoughts
The WTI crude oil market is currently navigating conflicting signals, with rising US inventories exerting downward pressure while geopolitical tensions offer potential support. Market participants will be closely watching the upcoming EIA report for directional cues.