WTI Oil steadies above $61.00 as concerns about oversupply ease
- WTI Oil pulls back from $62.00 highs but remains contained above $61.00.
- Crude prices appreciated nearly 8% this week, boosted by US sanctions on Russia.
- US crude Oil stocks dropped unexpectedly last week, pointing to strong demand.
Crude prices’ pullback from two-week highs at $62.00 witnessed on Thursday remains contained above $61.00 so far, with the commodity on track to its sharpest weekly rally in four months, as new sanctions on Russian Oil have eased market concerns about an Oil glut.
The US benchmark WTI Oil has rallied nearly 8% this week, boosted by Washington´s announcement of sanctions against Russia's largest crude producers, Rosneft and Lukoil. These measures are aimed at cutting down funding for the Russian war machine and forcing Moscow to negotiate a peace process “in good faith”.
Further sanctions on Russian Oil send prices surging
These sanctions are expected to block a significant portion of the global supply, and have calmed fears of a global oil glut, as producer countries continue to increase production, while the economic momentum of the world’s major economies suggests that global energy demand will remain subdued in the coming months.
News reports by Reuters suggest that China has suspended purchases of Russian Oil, while US President Trump affirmed earlier this week that he reached a deal with Indian President Narendra Modi to curb imports of Russian crude in exchange for lower US tariffs on imports from India, which are now taxed at 50%.
Lukoil and Rosneft had already been sanctioned by the British authorities last week. and the European Union added two refineries from China, which have a combined capacity of 600,000 barrels-per-day and Hong Kong’s China Oil to its list of restricted providers, adding pressure on Russian crude.
In this context, the US Energy Information Administration (EIA) revealed an unexpected drawdown in Oil stocks in the week of October 17. Inventories declined by 0.9 million barrels against expectations of a 1.2 million increase, pointing to a stronger-than-expected demand and providing additional support to Crude 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.
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