WTI declines to near $56.00 as Venezuelan oil deal overshadows US inventory drawdown
- WTI price drifts lower to near $56.05 in Thursday’s early European session.
- Trump's deal to import up to $2 billion worth of Venezuelan crude weighs on the WTI price.
- US crude stocks dropped by 3.831 million barrels last week, according to the EIA.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $56.05 during the early European trading hours on Thursday. The WTI price declines on US President Donald Trump statements on Venezuelan oil. Traders will keep an eye on the release of the US jobs data for December, which will be released later on Friday.
Trump said late Tuesday that Venezuela’s interim government agreed to give as many as 50 million barrels of “high-quality, sanctioned oil” to the US. Trump added that the US wants full access to Venezuela’s oil following the arrest of former President Nicolas Maduro by US forces over the weekend. Analysts believe that significant amounts of Venezuelan oil potentially entering the market offer long-term bearish momentum.
Nonetheless, the crude oil inventories report showed a sharper decline than anticipated, which might help limit the WTI’s losses. According to the US Energy Information Administration (EIA) weekly report, crude oil stockpiles in the US for the week ending January 2 fell by 3.831 million barrels, compared to a decline of 1.934 million barrels in the previous week. The market consensus estimated that stocks would rise by 1.1 million barrels.
The US employment report for December will take center stage on Friday. In case of a weaker-than-estimated outcome, this could undermine the US Dollar (USD) and lift the USD-denominated commodity price.
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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