WTI holds losses near $63.50 despite growing supply concerns
- WTI price may regain its ground amid rising Oil supply concerns.
- API Weekly Crude Oil Stock decreased by 3.8 million barrels last week, the largest draw in seven weeks.
- Oil prices were bolstered as NATO pledged a “robust” response to Russian airspace breaches.
West Texas Intermediate (WTI) Oil price edges lower after registering more than 2% in the previous session, trading around $63.50 per barrel during the Asian hours on Wednesday. Crude Oil prices gained ground after the American Petroleum Institute’s (API) Weekly Statistical Bulletin (WSB) reported a drop in United States (US) crude inventories, heightening supply concerns. API data showed US Weekly Crude Oil Stock fell by 3.8 million barrels last week, the largest draw in seven weeks, following the previous decline of 3.4 million barrels.
The Oil prices appreciated as Iraq's Kurdistan did not resume pipeline shipments of Oil from the region to Turkey despite hopes of a deal to end the deadlock, as two key producers asked for debt repayment guarantees. Pipeline flows have been stopped since March 2023, per Reuters.
Geopolitical tensions continued to support Oil prices, as NATO vowed a “robust” response to Russian airspace violations and Ukrainian drone attacks on Russian refineries and pipelines. Moreover, President Trump warned at the United Nations (UN) General Assembly on Tuesday that the United States (US) is ready to impose a “very strong round of powerful tariffs” if Russia refuses to end the war in Ukraine. Trump also criticized European countries for buying Russian energy, arguing that “they are funding the war against themselves,” and urged the EU to join Washington in implementing tariffs to ensure their effectiveness.
The price of the black gold may struggle as the Fed Chair Jerome Powell struck a cautious note, stressing that the US central bank must weigh stubborn inflation against a softening job market, calling it “a challenging situation” and reiterating comments from last week. It is worth noting that higher borrowing costs for longer would negatively impact the economic activities in the United States, the world’s largest Oil consumer, and dampen Oil demand.
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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