WTI climbs above $55.50 as Trump orders blockade of sanctioned Venezuelan oil tankers
- WTI price jumps to near $55.75 in Wednesday’s Asian session, up 1.25% on the day.
- Trump’s blockade announcement underpins the WTI price.
- US crude oil stockpiles fell by 9.3 million barrels last week, API said.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $55.75 during the Asian trading hours on Wednesday. The WTI price climbs amid rising volatility around Latin American crude supply. Traders await the release of the Energy Information Administration (EIA) crude oil stockpiles report later on Wednesday.
US President Donald Trump ordered a blockade of all sanctioned oil tankers entering and leaving Venezuela, Reuters reported late Tuesday. His comments came after US forces seized an oil tanker in waters near Venezuela, and Washington has ordered a huge build-up of US military forces off the Venezuelan coast in an operation said to target drug smuggling. Trump’s order to block sanctioned Venezuelan oil tankers could provide some support to the WTI price, as it raises supply disruption risks and adds a geopolitical premium.
Furthermore, a larger-than-expected crude oil inventory draw might also boost the black gold. Data released by the American Petroleum Institute (API) on Tuesday showed that crude oil stockpiles in the US for the week ending December 12 fell by 9.3 million barrels compared to a decline of 4.8 million barrels in the previous week. The market consensus was for a 2.2 million barrel decrease in the report period.
On the other hand, a possible peace deal to end the war in Ukraine might cap the upside for the WTI. Ukrainian President Zelenskiy said on Monday that talks between the US and Ukraine to end the war with Russia were "very constructive."
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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