WTI tumbles to below $65.50 amid concerns over oil demand
- WTI price loses momentum to near $65.40 in Wednesday’s early Asian session.
- Renewed trade tensions weigh on the oil demand outlook.
- Crude inventories in the United States declined by 577,000 barrels last week, noted API.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $65.40 during the early Asian trading hours on Wednesday. The WTI edges lower as US President Trump's tariff policies spark fresh concern over global fuel demand. Traders brace for the release of the US Energy Information Administration (EIA) weekly crude oil stock report later on Wednesday.
Traders are concerned that Trump's tariff policies will lead to slower global economic growth and reduced energy demand, which could exert some selling pressure on the WTI price. Trump stated that reciprocal tariffs will increase on August 1 for trade partners that have not reached a trade agreement with the US. Earlier this week, Trump had threatened a 30% tariff on the European Union (EU) imports if no deal was reached.
Additionally, concerns of a mounting global oil supply glut might contribute to the WTI’s downside. The Iraqi government has officially resumed crude oil exports from the Kurdistan Region after over two years' halt, in a move expected to ease tensions between Baghdad and Erbil and boost national export volumes. Kurdistan expects to supply Iraq's crude market with 230,000 barrels per day (bpd) of crude once exports resume. The outlook for larger crude exports from Iraq may boost global oil supplies and undermine the WTI price in the near term.
US crude oil inventories fell last week, which might provide some support to the WTI. The American Petroleum Institute (API) weekly crude oil stock report showed crude oil stockpiles in the US for the week ending July 18 declined by 577,000 barrels, compared to a rise of 19.1 million barrels in the previous week. So far this year, crude oil inventories are up 11 million barrels, according to Oilprice calculations of API data.
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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