WTI extends the rally to near $70.00 on US sanction threats to Russia
- WTI price edges higher to near $69.80 in Thursday’s early Asian session.
- Trump had threatened to end Russia's three-year-plus war on Ukraine in another 10 days.
- US Crude Oil Inventories unexpectedly increased sharply last week, said the EIA.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $69.80 during the Asian trading hours on Thursday. The WTI extends its upside to the highest levels in over a month as traders focus on potential developments on US President Donald Trump's tighter deadline for Russia to end the war in Ukraine.
Late Wednesday, Trump said he would impose a tariff of at least 25% on India’s exports to the US starting Friday. Trump also blasted India’s purchases of Russian energy and weapons. Trump’s threats to penalize India for buying Russian crude fueled investors’ worries that global supplies may tighten, which lifts the WTI price.
Additionally, Trump reiterated that the US may impose additional tariffs on Russia if Moscow does not make progress toward ending the war in Ukraine within 10 days. “The threat of secondary sanctions on Russian crude supported WTI and Brent crude prices over the last session,” said Daniel Ghali, a commodity strategist at TD Securities.
US crude oil inventories rose the most since January as domestic production and imports increased and exports fell. This, in turn, might cap the upside for the black hold. The US Energy Information Administration (EIA) weekly crude oil stock report showed crude oil stockpiles in the US for the week ending July 25 rose by 7.698 million barrels, compared to a fall of 3.169 million barrels in the previous week. The market consensus estimated that stocks would decline by 2.5 million barrels.
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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