West Texas Intermediate (WTI), the US crude oil benchmark, is trading at around $56.00 during Asian trading hours on Thursday. The price of West Texas Intermediate crude fell amid optimism about the peace agreement between Russia and Ukraine.
A potential peace deal in Ukraine would return Russian crude to a well-supplied market and impact black gold. “Ukraine attacks on oil infrastructure and US sanctions on Russian oil companies are likely to be lifted relatively quickly if an agreement is reached,” said Jorge León, head of geopolitical analysis at Rystad Energy.
On the other hand, the downside for WTI may be limited after US President Donald Trump said that the United States will prevent sanctioned tankers from entering and exiting Venezuela. The Venezuelan government on Wednesday ordered its navy to escort ships carrying petroleum products from the port, escalating the risk of confrontation as Trump ordered a “blockade” of the country’s oil industry.
Additionally, a larger-than-expected crude oil inventory draw may contribute to the upside for WTI. Data released by the Energy Information Administration (EIA) on Wednesday showed that US crude oil inventories for the week ending December 12 fell by 1.274 million barrels compared to a decline of 1.812 million barrels in the previous week. The market consensus was for a decline of 1.1 million barrels in the reporting period.
Frequently asked questions about West Texas Intermediate crude oil
West Texas Intermediate oil is a type of crude oil that is sold in international markets. WTI stands for WTI, and is one of three main types including Brent and Dubai crude. WTI is also referred to as “light” and “sweet” due to its relatively low gravity and sulfur content, respectively. It is considered a high quality oil and easy to refine. It is sourced from the United States and distributed through the Cushing Hub, considered the “pipeline crossroads of the world.” It is a benchmark for the oil market and the price of WTI is frequently quoted in the media.
Like all assets, supply and demand are the main drivers of the price of WTI. 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 affect prices. Decisions by OPEC, a group of major oil-producing countries, are another major driver of the price. The value of the US dollar affects the price of WTI, as oil is mostly traded in US dollars, so a weak US dollar can make oil more affordable and vice versa.
Weekly oil inventory reports from the American Petroleum Institute (API) and the Energy Information Agency (EIA) influence the price of WTI. Changes in inventories reflect fluctuations in supply and demand. If data shows a decline in inventories, this could indicate increased demand, leading to higher oil prices. High inventories can reflect increased supply, causing prices to fall. The API report is published every Tuesday and the EIA report the next day. Their results are usually similar, falling within 1% of each other 75% of the time. EIA data is more reliable, because it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 oil-producing countries that collectively decides production quotas for member countries at meetings held twice a year. Their decisions often affect WTI prices. When OPEC decides to cut its quotas, it can tighten supply, causing oil prices to rise. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten additional non-OPEC members, most notably Russia.
