WTI drifts higher to near $58.50 amid geopolitical tensions

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West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $58.50 during the early European trading hours on Wednesday. The WTI price edges higher amid persistent geopolitical tensions, such as the US action on Venezuelan oil tankers.

WTI price trades in positive territory for the fourth consecutive day near $58.50 in Wednesday’s early Asian session.
Renewed geopolitical tensions boost the WTI price.
US crude oil inventories rose by 2.4 million barrels last week, said API.

Geopolitical risks are currently the primary support for the WTI price. The United States intensified its attempts to block Venezuela's crude oil supplies. In an effort to disrupt supply and cut off funding for the Maduro regime, the US intercepted two Venezuelan oil tankers in the Caribbean Sea and threatened to seize additional sanctioned boats approaching or departing Venezuela.

Reuters reported late Monday that US President Donald Trump said the US would maybe keep and maybe sell the oil it had seized off the coast of Venezuela in recent weeks. He further stated that the US would also keep the seized ships.

On the other hand, an unexpected increase in the US crude oil inventories report indicated a potential softening in demand, which could weigh on the black gold. Data released by the American Petroleum Institute (API) on Tuesday showed that crude oil stockpiles in the US for the week ending December 19 rose by 2.4 million barrels compared to a fall of 9.3 million barrels in the previous week.

Traders await the release of the Energy Information Administration (EIA) crude oil stockpiles report later on Wednesday. A larger-than-expected crude oil inventory draw indicates stronger demand and could boost the WTI price, while a bigger build than estimated signals weaker demand or excess supply, which might drag the WTI price lower.

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.