WTI steadies above $68.50 amid large surprise crude draw
- WTI price remains steady near $68.65 in Thursday’s early Asian session.
- Israel agreed to a ceasefire agreement with Lebanon’s Hezbollah militants, effective Wednesday.
- US crude stocks fell by 1.844 million barrels last week, according to the EIA.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $68.65 on Wednesday. The WTI price holds steady as a large surprise crude draw offsets a ceasefire deal between Israel and Hezbollah. The oil market might be somewhat quiet due to the Thanksgiving Day holiday.
The latest US economic data indicated that the progress on lowering inflation appears to have stalled in recent months, which could diminish the expectation for the Federal Reserve (Fed) to cut interest rates in 2025. The markets are now pricing in nearly 66.5% chance that the Fed will cut rates by a quarter point in December, up from 55.7% before the PCE data, according to the CME FedWatch Tool.
However, they anticipate the Fed will leave rates unchanged at its meetings in January and March. It’s worth noting that slower-than-expected rate reductions would keep borrowing costs high, which could slow economic activity and lower oil demand.
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, effective Wednesday. The easing geopolitical risks could drag the WTI price lower. "The real question will be for how long it (the ceasefire) will truly be honored," said Dennis Kissler, senior vice president of trading at BOK Financial.
However, a decline in US crude inventories last week might boost the black gold price. The US Energy Information Administration's (EIA) weekly report showed Crude oil stockpiles in the United States for the week ending November 22 fell by 1.844 million barrels, compared to a rise of 545,000 barrels in the previous week. The market consensus estimated that stocks would decrease by 1.3 million barrels.
Meanwhile, gasoline stocks added 3.3 million barrels in the week to November 22. This compared with an inventory build of 2.1 million barrels for the previous week.
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.