WTI holds position near $69.00 due to rising supply fears over Middle-East conflict

• WTI price may appreciate amid rising supply fears following recent Israel's attacks on Iranian-backed militant groups.
• The escalation of attacks in the Middle East is increasing the likelihood of Iran's involvement in the conflict.
• Oil prices might have received downward pressure following the mixed Manufacturing PMI data from China.

West Texas Intermediate (WTI) Oil price holds its position around $69.20 per barrel during Monday’s Asian hours. However, crude Oil prices could appreciate amid growing concerns about potential supply disruptions from the Middle East following Israel's intensified attacks on Iranian-backed militant groups Hezbollah and the Houthis. These geopolitical tensions may lead to fears of instability in the region, potentially impacting Oil supply and driving prices higher.

Reuters reports that ANZ Research has noted that the recent escalation of attacks in the Middle East is raising the likelihood of Iran, a significant producer and member of the Organization of the Petroleum Exporting Countries (OPEC), becoming directly involved in the conflict.

Israel announced it bombed Houthi targets in Yemen on Sunday, broadening its confrontation with Iran's allies. This action follows the killing of Hezbollah leader Sayyed Hassan Nasrallah two days earlier, intensifying the ongoing conflict in Lebanon.

Oil prices might have received downward pressure following the mixed Manufacturing Purchasing Managers’ Index (PMI) data from the world’s largest crude importer China. China's Caixin Manufacturing Purchasing Managers' Index (PMI) fell to 49.3 in September, indicating contraction, down from 50.4 in August. China’s NBS Manufacturing Purchasing Managers' Index (PMI) improved to 49.8 in September, up from 49.1 in the previous month and surpassing the market consensus of 49.5.

Additionally, Oil traders are closely monitoring recent monetary measures in China aimed at stimulating economic activity and boosting energy demand. Last week, China announced to inject over CNY 1 trillion in capital into its largest state banks, facing multiple challenges. This substantial capital infusion would mark the first of its kind since the 2008 global financial crisis.

However, crude Oil prices may face challenges from Saudi Arabia's plans to increase production later this year, alongside OPEC+'s decision to raise output by 180,000 barrels per day in December. A report from the Financial Times, citing unnamed sources familiar with the country's plans, indicated that Saudi Arabia is committed to resuming production on December 1, even if it results in a period of lower prices.

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 13 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.

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