Oil prices have risen from Wednesday’s lows of $58.65, reaching session highs above $59.60 at the time of writing. A new set of US sanctions on Russia go into effect on November 21, and are expected to restrict Russian oil exports and provide some support for the commodity.
Data released on Wednesday by the US Energy Information Administration (EIA) revealed a larger-than-expected draw in crude oil inventories, which fell by 3.426 million barrels in the week ending November 14, beating expectations for a decline of 1.9 million.
These numbers offset the impact of the American Petroleum Institute report, released the previous day, which showed an increase of 4.4 million in oil inventories, after an increase of 1.3 million the previous week.
However, Thursday’s rebound hardly makes up for the 2.3% decline seen on Wednesday. Rumors of secret negotiations between the United States and Russia to end the war in Ukraine underestimate the expected impact of sanctions on Russia. At the same time, producing countries are expected to continue to increase production in times of weak global demand, reinforcing market fears of oversupply.
The OPEC supply forecast, released last week, estimated that global oil supplies will match global demand next year amid rising OPEC+ production. This statement highlights the shift from previous estimates of the global oil deficit in 2026 and led to sharp declines in crude oil prices.
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.
