- WTI price loses momentum to near $56.00 in Thursday’s Asian session.
- A possible peace agreement in Ukraine undermines the WTI price, but the US blockade of Venezuela might cap its downside.
- US crude oil stockpiles fell by 1.274 million barrels last week, EIA said.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $56.00 during the Asian trading hours on Thursday. The WTI price edges lower amid optimism over a peace agreement between Russia and Ukraine.
A possible peace agreement in Ukraine would bring Russian crude back to a well-supplied market and weigh on the black gold. “Ukraine’s attacks on oil infrastructure and U.S. sanctions on Russian oil companies would likely be lifted relatively quickly in the event of an agreement,” said Jorge Leon, Rystad Energy’s head of geopolitical analysis.
On the other hand, the downside for the WTI might be limited after US President Donald Trump said the United States (US) will block sanctioned tankers from entering and leaving Venezuela. Venezuela’s government on Wednesday ordered its Navy to escort ships carrying petroleum products from port, escalating the risk of a confrontation with Trump ordered a “blockade” aimed at the country’s oil industry.
Additionally, a larger-than-expected crude oil inventory draw might contribute to the WTI’s upside. Data released by the Energy Information Administration (EIA) on Wednesday showed that crude oil stockpiles in the US for the week ending December 12 declined by 1.274 million barrels compared to a fall of 1.812 million barrels in the previous week. The market consensus was for a 1.1 million barrel decrease in the report period.
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.
