WTI depreciates to near $81.50, Saudi expects to rebound Oil exports to China

July 9, 2024 5:57 am

  • The WTI price struggled as Hurricane Beryl caused less damage than anticipated.
  • Saudi Oil exports to China are anticipated to recover in August, potentially reaching a minimum of 44 million barrels.
  • Oil prices face challenges as a potential ceasefire agreement in Gaza could alleviate the supply threat.

West Texas Intermediate (WTI) Oil price extends its losses for the third session, trading around $81.50 per barrel during the Asian hours on Tuesday. Crude Oil prices faced pressure after Hurricane Beryl, which struck a key US Oil-producing hub in Texas, caused less damage than anticipated by markets. Despite slowdowns in refining activity and evacuations at production sites, major refineries along the US Gulf Coast reported minimal impact from the hurricane.

This decline would be partly influenced by recent developments involving Saudi Arabia. According to Reuters, Saudi crude Oil exports to China are expected to rebound in August, with shipments reaching at least 44 million barrels, which will bolster demand.

Exports to China from Saudi Arabia are set to increase in August for the first time in four months, rising from approximately 36.00 million barrels in July. This rebound is expected to assist the largest Oil exporter in reclaiming its share in the largest import market. Saudi exports to China had plummeted to 1.12 million barrels per day (bpd) in June, the lowest since March 2020, as Reuters reported data from analytics firm Kpler.

Looking ahead, crude Oil prices might encounter further challenges as market participants await progress in ceasefire negotiations in the Middle East. A potential ceasefire agreement in Gaza could alleviate concerns about global crude supply disruptions. However, according to the White House, significant differences remain between the parties involved, with Hamas expressing concerns over new Israeli actions in Gaza that could jeopardize the potential for an agreement.

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 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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