WTI trades below $82.00 as IEA plans record Oil reserve release
- WTI declines as the International Energy Agency considers its largest-ever oil reserve release to stabilize markets.
- The Israel Defense Forces launched a new wave of strikes targeting Iran and Lebanon.
- Major Middle Eastern producers cut output by over 6 million bpd as the Strait of Hormuz remains effectively closed.
West Texas Intermediate (WTI) crude oil price gave up gains from the previous session, trading around $81.70 per barrel during the Asian hours on Wednesday. Oil prices fall after the Wall Street Journal reported the International Energy Agency (IEA) is considering its largest-ever oil reserve release to stabilize markets. The proposed drawdown would surpass the 182 million barrels released in 2022 following Russia’s invasion of Ukraine.
However, losses in oil prices may remain limited due to rising uncertainty surrounding the Iran conflict and shipping disruptions through the crucial Strait of Hormuz. Meanwhile, US Central Command reported that the US military had “eliminated” 16 Iranian mine-laying vessels near the Strait of Hormuz on Tuesday. The action followed warnings from United States (US) President Donald Trump that any mines placed in the Strait by Iran must be removed immediately.
The Israel Defense Forces reported launching a new wave of strikes on Iran after explosions were heard in Tehran. Israel also fired additional missiles toward Lebanon, where its military said it was targeting infrastructure linked to Iran-backed Hezbollah in southern Beirut.
President Trump said late Monday that the conflict could end soon. However, US officials indicated on Tuesday that military operations were intensifying, with limited prospects for diplomatic negotiations, Reuters reported.
Major Middle Eastern producers, including Saudi Arabia, the United Arab Emirates (UAE), Kuwait, and Iraq, have collectively reduced output by more than 6 million barrels per day (bpd) as the Strait of Hormuz remains effectively closed. In addition, the largest oil refinery in the UAE halted operations after being hit by a drone strike.
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.