WTI edges higher above $71.00 on China stimulus, geopolitical risks

• WTI gains ground near $71.30 in Wednesday’s early Asian session, the highest since September 2. 
• Chinese stimulus plan and continued fear over Middle Eastern tensions underpin the WTI price. 
• US Crude oil inventories fell by 4.339 million barrels for the week ending September 20, according to the API. 

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $71.30 on Wednesday. WTI price edges higher amid the positive development surrounding Chinese stimulus measures and ongoing geopolitical tensions in the Middle East. 

Additional stimulus measures from China have provided some support to the WTI price as China is the world's top crude importer. People’s Bank of China (PBoC) unveiled a broad package of monetary stimulus measures to revive the economy. "The Chinese government's announcement of its largest stimulus package since the pandemic, combined with the sudden rise of geopolitical tension in the Middle East ... has dealt a blow to the bearish sentiment that dominated the oil markets in the past three weeks," said Claudio Galimberti, global market analysis director at Rystad Energy.

Meanwhile, the escalating geopolitical tensions in the Middle East contribute to the WTI’s upside as it raises concerns about oil supply disruptions. Israel has attacked Hezbollah in Lebanon every day for the past week from commander assassinations to the destruction of missile launchers, per Bloomberg. 

US crude oil inventories fell more than expected last week. According to the American Petroleum Institute (API), crude oil stockpiles in the United States for the week ending September 20 fell by 4.339 million barrels, compared to an increase of 1.960 million barrels in the previous week. The market consensus estimated that stocks would decline by just 1.100 million barrels.

Oil traders will take more cues from the weekly EIA Crude Oil stockpiles report, which is due later on Wednesday. Additionally, Federal Reserve Governor Adriana Kugler is scheduled to speak later in the day. 

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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