WTI remains on the defensive near $71.00 amid a rise in US oil stockpiles, concern about US-China trade
- WTI price edges lower to around $71.00 in Thursday’s early Asian session.
- US crude oil stockpiles rose by 8.664 million barrels last week, according to the EIA.
- Oil traders worry about China-US trade.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $71.00 during the early Asian session on Thursday. The WTI price edges lower amid a large build in US crude stockpiles and worries about renewed US-China trade tensions.
US crude inventories rose sharply last week, signaling weaker demand. The US Energy Information Administration (EIA) weekly report showed crude oil stockpiles in the United States for the week ending January 31 climbed by 8.664 million barrels, compared to a rise of 3.463 million barrels in the previous week. The market consensus estimated that stocks would increase by 3.2 million barrels.
Concerns of a potential trade war between the United States and China, the world's top energy importer, could exert some selling pressure on the WTI price. On Tuesday, China's finance ministry announced a package of tariffs on a range of US products, including crude oil, farm equipment, and some autos in an immediate response to a 10% tariff on Chinese imports announced by US President Donald Trump. Additionally, China put several companies, including Google, on notice for possible sanctions in a measured response to Trump's tariffs.
On Wednesday, Iran's President Masoud Pezeshkian called OPEC members to unite against potential US sanctions after Trump's announcement of resuming the "maximum pressure" campaign against Iran during his first term. Meanwhile, Russia's Deputy Prime Minister Alexander Novak said that the group of ministers from OPEC and allies headed by Russia (OPEC+) reviewed Trump's proposal to increase production and decided that OPEC+ would begin increasing output on April 1 in accordance with previous plans.
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.