West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $58.10 during early Asian trading hours on Tuesday. The price of West Texas Intermediate crude oil remains steady as traders assess the potential impact on crude oil flows from Venezuela following the US arrest of Venezuelan President Nicolas Maduro.
Over the weekend, the US military entered Venezuela, arrested Venezuelan President Nicolas Maduro and his wife Celia Flores and brought them to New York. US President Donald Trump said on Saturday that Washington will administer Venezuela at least temporarily and exploit its vast oil reserves to sell to other countries. The Trump administration has spoken with several oil companies about rebuilding Venezuela, according to Taylor Rogers, a White House spokeswoman.
Traders continue to digest news that Maduro has been arrested and that the United States will take control of the OPEC member whose crude oil exports were subject to US sanctions that remain in place. “The unknown for the oil market is how oil flows from Venezuela will change due to US measures,” Aegis Hedging analysts said.
Developments surrounding oil flow changes in Venezuela will be closely monitored. Any signs of escalating geopolitical tensions and risks of disruption associated with Venezuela could boost the price of WTI in the near term.
The highlight will be the release of the American Petroleum Institute (API) crude oil inventories report later 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.
