WTI drifts higher above $59.50 on Kazakh supply disruptions
- WTI price attracts some buyers to near $59.65 in Wednesday’s early Asian session.
- The temporary suspension of output at Kazakhstan's oil fields supports the WTI price.
- The US threatens tariffs on European nations over Greenland.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $59.65 during the early Asian trading hours on Wednesday. The WTI price edges higher amid the escalating Greenland crisis and an unplanned outage at a major Kazakhstan field. Traders await the release of the American Petroleum Institute (API) crude oil stockpiles report later on Tuesday.
Bloomberg reported on Tuesday that Kazakh oil producer Tengizchevroil, led by Chevron, said that it had temporarily halted production at the Tengiz and Korolev oilfields after two fires at power generators. The Tengiz field will be shut for another seven to 10 days, and supply disruptions could provide some support to the WTI price.
Kazakhstan had already reduced 900,000 barrels per day (bpd) of crude production that feeds the Caspian Pipeline Consortium terminal on Russia's Black Sea Coast due to drone strikes.
"Tengiz is amongst the largest fields in the world and so the outage is certainly disruptive for crude flows," said Ajay Parmar, director of energy and refining at ICIS. "But this disruption does look to be temporary, and so if the tariffs rhetoric continues, we expect prices to fall back," he said
US President Donald Trump over the weekend threatened to impose tariffs on eight European nations that oppose his plans to take control of Greenland. It would rise to 25% if an agreement is not reached by June 1. Trump is set to talk about Greenland at the World Economic Forum in Davos, Switzerland, on Wednesday. Fears of a damaging US-EU trade war could hurt market sentiment and might cap the upside for 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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