WTI moves below $67.50 due to Oil output increase, tariff tensions
- WTI loses ground as rising trade tensions dampen global Oil demand.
- The IEA reported that Saudi Arabia exceeded its Oil output target against OPEC+ implied target.
- Traders expect Trump to announce further sanctions on Russia that may affect Oil supplies.
West Texas Intermediate (WTI) Oil price edges lower after registering more than 2.5% gains in the previous session, trading around $67.30 per barrel during the Asian hours on Monday. Crude Oil prices face challenges due to increasing Oil output in Saudi Arabia and ongoing tariff tensions dampening global Oil demand.
The International Energy Agency (IEA) reported that Saudi Arabia exceeded its Oil output target by 430,000 barrels per day in June and reached 9.8 million bpd, against the kingdom's implied Organization of the Petroleum Exporting Countries and its allies including Russia (OPEC+) target of 9.37 million bpd.
In response, Saudi Arabia's energy ministry noted that the kingdom had been fully adhered to its voluntary OPEC+ output target, reporting that Saudi marketed crude supply in June was 9.352 million bpd, in line with the agreed quota.
However, mixed Chinese trade balance data could provide mild support for the crude Oil as China is the largest Oil importer. Chinese Exports climbs 7.2% year-over-year in June, following 6.3% in April. Meanwhile, imports increased 2.3% YoY in the same period, recovering from a previous decline of 2.1%.
However, crude Oil prices gained ground due to expected further United States (US) sanctions on Russia that may affect global supplies. US President Donald Trump announced, on Saturday, a 30% tariff on imports from the European Union (EU) and Mexico starting August 1. Trump also proposed a blanket tariff rate of 15%-20% on other trading partners, an increase from the current 10% baseline rate. However, the European Union (EU) stated that it will extend its pause on retaliatory measures against US tariffs until early August, expecting to reach a negotiated agreement.
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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