WTI extends upside above $70.50 ahead of US Retail Sales release
- WTI price extends the rally to near $70.60 in Tuesday’s Asian session.
- The ongoing conflict between Israel and Iran lifts the WTI price.
- The US Retail Sales data for May will be the highlight later on Tuesday.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $70.60 during the Asian trading hours on Tuesday. The WTI price edges higher amid persistent geopolitical risk in the Middle East. The American Petroleum Institute (API) weekly crude oil stock will be released later on Tuesday.
An Israeli attack targeted Iran's state broadcaster on Monday, while the head of the United Nations (UN) nuclear watchdog reported substantial damage to Iran's largest uranium enrichment facility.
A senior commander stated on Saturday that Iran is considering shutting down the Strait of Hormuz. The strait transports around one-fifth of the world's oil to global markets, according to Goldman Sachs. A closure of the strait could boost the oil prices. Fears that a wider war in the region could disrupt supplies in the region continue to underpin the WTI price.
However, the hope of easing Middle East geopolitical tensions might cap the upside for the black gold. US President Donald Trump said Iran wants to talk about de-escalating the conflict, helping quell fears that a protracted war would engulf a region that produces around a third of the world’s crude.
Oil traders will keep an eye on the US May Retail Sales data, which is due later on Tuesday. If the report showed a stronger-than-expected outcome, this could boost the Greenback and weigh on the USD-denominated commodity price in the near term.
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.