WTI rebounds above $57.50 as US seizes Venezuelan tanker
- WTI price edges higher to near $57.85 in Friday’s early Asian session.
- US forces intercepted and seized a sanctioned oil tanker off the coast of Venezuela, lifting the WTI price.
- Traders will closely monitor the developments surrounding the Ukraine peace deal.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $57.85 during the Asian trading hours on Friday. The WTI price recovers some lost ground from its lowest close in almost two months amid geopolitical factors, including the US seizure of a sanctioned oil tanker off Venezuela.
Bloomberg reported on Thursday that US forces intercepted and seized a sanctioned oil tanker off the coast of Venezuela, marking a serious escalation of tensions between the two countries. The US move may make it considerably more difficult for Venezuela to export its crude, since foreign shippers are now less inclined to load its cargoes. Geopolitical tensions could provide some support to the WTI price in the near term.
On the other hand, Ukraine peace talks ease sentiment, and analysts believe that ending the Russia-Ukraine war would reduce threats to the region’s energy infrastructure and increase predictability on the supply side. This might cap the upside for the black gold. Ukrainian President Volodymyr Zelensky said on Thursday that Kyiv’s delegation spoke with top US officials to discuss security guarantees for Ukraine in a video call after presenting America with a revised 20-point framework to end the war with Russia.
The Federal Reserve (Fed) decided to reduce its benchmark interest rate by a quarter percentage point at its December policy meeting on Wednesday, bringing the target range to 3.50% to 3.75%. Fed officials signaled they expect to lower rates just once next year. Lower rates can reduce consumer borrowing costs and boost economic growth and oil demand, supporting the black gold.
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.
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