WTI recovers above $68.50 on a large surprise crude draw
- WTI price rebounds to near $68.75 in Wednesday’s early Asian session.
- US crude oil stocks fell by 5.935 million barrels last week, according to the API on Tuesday.
- The possible Middle East peace deal caps the WTI’s upside.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $68.75 on Wednesday. The WTI price edges higher amid the uncertainty for the US oil industry and the large surprise crude draw.
US President-elect Donald Trump said he would impose a 25% tariff on all products coming into the US from Mexico and Canada. The US oil industry might face an unpredictable outlook if Trump follows through on newly promised blanket tariffs on imports from these countries.
"These would obviously be very economically disturbing tariffs if they were put into place," Josh Zive, senior principal at Bracewell LLP, told S&P Global Commodity Insights. "This is what, probably initially, ends up persuading them not to impose them—the energy sector is one that's going to be hit most dramatically by these sorts of tariffs,” added Zive.
A decline in US crude inventories last week might boost the black gold price. The American Petroleum Institute (API) weekly report showed Crude oil stockpiles in the United States for the week ending November 22 fell by 5.935 million barrels, compared to a rise of 4.753 million barrels in the previous week. The market consensus estimated that stocks would increase by just 250,000 barrels.
Investors will closely monitor the developments surrounding the ongoing geopolitical tensions in the Middle East. On Tuesday, Israel approved a ceasefire agreement with Lebanon’s Hezbollah militants that would end nearly 14 months of fighting linked to the war in the Gaza Strip, per the AP News. The easing geopolitical risks could drag the WTI price lower.
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.