The price of the US benchmark WTI Oil remains pinned near the three-week lows, sub-$56.00 hit earlier on Wednesday, as an unexpected US deal to import Crude from Venezuela has increased market concerns of an Oil glut.
US President Donald Trump announced on Tuesday that the US will import 30 to 50 million barrels from the hitherto sanctioned Venezuelan oil reserves. The news has increased the global supply of crude while demand for the commodity falters, amid the economic slowdown of most of the world’s major economies.
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WTI Oil prices dropped more than $2 following the news of the US deal with Caracas, reaching prices below $57.00 for the first time since mid-December, before bouncing up on Wednesday. Prices, however, remain capped below $56.60 so far, with investors awaiting the release of key US employment figures.
Data released by the American Petroleum Institute (API) on Tuesday revealed that Oil stocks declined by 2.8 million barrels in the last week of December against expectations of a 12 million barrels increase.
Furthermore, the OPEC+, which integrates most of the world’s major Crude producers, agreed this weekend to keep output levels unchanged in a quick meeting that tiptoeed over the rising tensions among member countries. The decision, however, has failed to provide any significant support to prices.
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.
Source: https://www.fxstreet.com/news/wti-oil-prices-struggle-to-break-above-5650-amid-oversupply-concerns-202601070941
