WTI declines to near $66.00 on US crude stock surge, traders monitor US-Iran developments

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WTI price drifts lower to near $66.05 in Wednesday’s early Asian session.
US crude stockpiles rose 11.4M barrels last week, API said.
Traders will closely monitor the developments surrounding US-Iran tensions before nuclear talks.

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $66.05 during the early Asian trading hours on Wednesday. The WTI price declines amid a significant build in US crude stockpiles. Traders brace for the release of the Energy Information Administration (EIA) report, which will be released later on Wednesday.

According to the American Petroleum Institute (API) weekly report, crude oil stockpiles in the US for the week ending February 20 climbed by 11.4 million barrels, compared to a decline of 609,000 barrels in the previous week. The report raises oversupply concerns and weighs on the WTI price.

Traders will closely monitor the developments surrounding the US and Iran tensions ahead of nuclear talks on Thursday in Geneva. On Monday, the US embassy in Lebanon evacuated "dozens of its staff members" as a precaution amid anticipated regional developments.

US President Donald Trump said last week that he is thinking about launching a limited military attack on Iran to increase pressure on the nation to reach a nuclear agreement. He added that he believed that 10 to 15 days was "pretty much" the "maximum" amount of time he would permit for discussions to continue. Any signs of escalating tensions between the US and Iran could boost the black gold price.

The EIA crude oil stockpiles report will be published on Wednesday. A larger-than-expected crude oil inventory draw indicates stronger demand and could lift the WTI price, while a bigger build than estimated signals weaker demand or excess supply, which might weigh on the WTI price.

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 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.