WTI tumbles below $65.50 on demand concerns
- WTI price extends its downside to near $65.45 in Tuesday’s early Asian session.
- Fears of slow global economies and US tariffs weigh on the WTI price.
- Possible sanctions against Iran and Russia from the US might help limit the WTI’s losses.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $65.45 during the early Asian session on Tuesday. The WTI price extends the decline amid concerns that US tariffs on Canada, Mexico and China would slow global economies and slash energy demand.
US President Donald Trump issued an executive order last week exempting goods from both Canada and Mexico under a North American trade agreement, known as USMCA, while raising duties on Chinese goods. China retaliated against the US and Canada with tariffs on agricultural products.
Continued policy uncertainty surrounding the Trump administration's trade policy and a probable global economic slowdown that could curtail oil demand are likely to undermine the WTI price in the near term. "There are recession talks for the U.S. and it's very concerning for the macro picture,” said John Kilduff, partner with Again Capital in New York.
On the other hand, possible sanctions against Iran and Russia from the US could provide support for the WTI price. Trump is trying to choke off Iranian oil exports as part of his attempts to push Tehran to curtail its nuclear program. Iran's Supreme Leader, Ayatollah Ali Khamenei, said on Saturday that his country will not be bullied into negotiations.
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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