WTI falls to near $61.00, downside appears limited due supply concerns
- WTI slipped but remains on course for a weekly gain, trading near its two-week high.
- The United States has blacklisted Russian Oil giants Rosneft and Lukoil.
- Chinese Oil firms halt Russian seaborne imports; Indian refiners plan major cuts to meet new restrictions.
West Texas Intermediate (WTI) Oil price depreciates after three days of gains, trading around $61.00 per barrel during the Asian hours on Friday. However, crude Oil prices remain on track for a weekly gain and hover around two-week highs amid increased supply concerns, driven by the fresh United States (US) sanctions on Russia's two biggest Oil companies.
The United States has blacklisted state-run Oil giants Rosneft and Lukoil in an effort to pressure Russian President Vladimir Putin over the war in Ukraine. Together, the two companies account for nearly half of Russia’s Oil exports and over 5% of global Oil production, making them crucial to financing the Kremlin’s budget.
Reuters reported that Chinese state-owned Oil companies have temporarily suspended seaborne purchases of Russian Oil, while Indian refiners plan significant import cuts to comply with the new measures. Meanwhile, the European Union (EU) has imposed additional sanctions targeting Russia’s energy infrastructure, as Ukrainian forces continue strikes on refineries, pipelines, and export terminals. Kyiv claimed it struck a Rosneft refinery on Thursday.
The US said it was prepared to take additional measures, while President Putin dismissed the sanctions as an unfriendly gesture, claiming they would have little impact on Russia’s economy and emphasizing the country’s importance in the global market. Meanwhile, Kuwait’s Oil minister noted that Organization of the Petroleum Exporting Countries (OPEC) is prepared to counter any potential market shortages by reversing its production cuts.
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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