WTI climbs above $66.00 as trade talk optimism outweighs concerns over Oil oversupply
- WTI price appreciates as trade talk optimism bolsters the outlook for the Oil demand.
- The US and EU are reportedly close to finalizing a deal that would impose 15% tariffs on EU goods.
- The US may allow Venezuela’s state-run PDVSA to resume operations in the sanctioned OPEC nation and swap Oil.
West Texas Intermediate (WTI) Oil price extends its gains for the second successive session, trading around $66.30 per barrel during the Asian hours on Friday. Crude Oil prices receive support on optimism surrounding trade talks, which bolstered the outlook for the global economy and Oil demand.
Traders keep their eyes on progress in tariff negotiations, with the United States (US) and European Union (EU) reportedly nearing an agreement that would impose 15% tariffs on EU goods imported into the US. Moreover, US President Donald Trump announced earlier this week a major tariff deal with Japan, which includes a 15% tariff on Japanese exports.
However, the recent US Initial Jobless Claims data supports the odds of the Federal Reserve (Fed) keeping interest rates unchanged at next week’s meeting. Markets are now pricing in fewer than two rate cuts for the year, with the first fully expected in October. The jobless claims fell to 217,000 in the previous week, down from 227,000 and 221,000 in the prior weeks. The higher borrowing cost negatively impacts the economic activities in the United States, the world’s largest consumer, and Oil consumption.
Additionally, Oil price may come under pressure as the US is reportedly preparing to issue new authorizations to key partners of Venezuela’s state-run PDVSA, starting with Chevron, allowing them to operate in the sanctioned OPEC nation and swap Oil, according to five sources cited by Reuters on Thursday.
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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