WTI keeps the red above mid-$65.00s amid trade-war fears, US-Iran tensions offer support

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WTI kicks off the new week on a weaker note amid renewed trade-war fears.
The risk of a US-Iran military conflict acts as a tailwind for the black liquid.
A broadly weaker USD further supports the commodity and helps limit losses.

West Texas Intermediate (WTI) US Crude Oil prices open with a bearish gap at the start of a new week and move further away from the highest level since August 4, around the $68.00 mark, touched last Friday. The black liquid trades above mid-$65.00s during the Asian session, down over 1.0% for the day, amid renewed trade war fears, which create uncertainty for the world economic growth and fuel consumption.

The Supreme Court on Friday ruled that US President Donald Trump did not have the authority to impose sweeping reciprocal tariffs under the International Emergency Economic Powers Act (IEEPA). Trump, however, moved quickly to announce a new 15% tariff framework, signaling that his trade agenda remains firmly intact. This, in turn, fuels concerns about the potential economic fallout from trade tensions, which could dent fuel demand and turn out to be a key factor weighing on Crude Oil prices.

However, the risk of a military conflict between the US and Iran acts as a tailwind for the black liquid. Negotiators from the US and Iran are poised to meet in Geneva on Thursday following the submission of a detailed nuclear proposal by Iran. Officials describe the talks as potentially the last diplomatic window before the Trump administration considers military action. This could trigger a broader conflict, as Iran had warned that all bases and assets of a hostile force in the region would be legitimate targets if attacked.

Moreover, a broadly weaker US Dollar (USD) limits the downside for the USD-denominated Crude Oil prices. Investors seem convinced that the US Federal Reserve (Fed) keep rates on hold at the next policy meeting in March, and the bets were reaffirmed by hot US inflation data, released on Friday. However, the Advance US GDP report showed that the US economy slowed sharply during the fourth quarter, keeping hopes alive for more easing by the Fed later this year, and weighs on the USD amid trade uncertainties.

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.