West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $57.30 during early Asian trading hours on Monday. The price of West Texas Intermediate crude oil rose amid geopolitical tensions. Traders are bracing for the release of the American Petroleum Institute (API) crude oil inventories report on Tuesday for fresh momentum.
US President Donald Trump’s administration called for a “large-scale strike against Venezuela” and arrested its president, Maduro, to face charges, according to CNN. This action came without Congressional approval. Trump also stated that the United States will manage Venezuela until it can make a safe, sound, and wise transition. US Secretary of State Marco Rubio said on Sunday that the administration will use its influence over oil to force more change in Venezuela.
Worried about possible supply disruptions after the US kidnapped the Venezuelan leader from Caracas over the weekend, Trump said Washington would take control of the oil-producing country, boosting the price of West Texas Intermediate crude.
“Prices may see a modest rise due to heightened geopolitical tensions and disruption risks linked to Venezuela and Iran, but abundant global supplies should continue to limit those risks for the time being,” said Ole Hansen, head of commodities research at Saxo Bank.
The Organization of the Petroleum Exporting Countries and its allies (OPEC+) kept oil production unchanged on Sunday while avoiding discussions of the geopolitical crises affecting many members of the producer group. OPEC+ said the group will meet again on February 1.
API’s crude oil inventories report will be the highlight on Tuesday. A larger-than-expected crude oil inventory draw indicates stronger demand and could boost the WTI price, while a larger-than-expected build indicates weak demand or oversupply, which could push the WTI price lower.
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.
