West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $60.70 during Asian trading hours on Wednesday. The price of West Texas Intermediate crude fell as Venezuela resumes exports and the American Petroleum Institute (API) shows a significant increase in US crude inventories. Traders are preparing for the Energy Information Administration’s (EIA) crude oil inventories report on Wednesday.
Reuters reported on Tuesday that Venezuela had begun to reverse oil production cuts made under the US oil embargo, while also resuming crude exports. The source said that two giant tankers left Venezuelan seas on Monday, each carrying about 1.8 million barrels of crude oil, in what may be the first shipments of a 50 million barrel supply agreement between Caracas and Washington to resume exports after the US arrest of Venezuelan President Nicolas Maduro.
US crude inventories are witnessing a significant increase in US crude inventories. According to the American Petroleum Institute’s weekly report, US crude oil inventories for the week ending January 9 rose by 5.27 million barrels, compared to a decline of 2.8 million barrels in the previous week. Market consensus estimates that inventories will fall by 2.0 million barrels.
However, ongoing tensions in Iran, a major crude oil producer, could boost the price of WTI. US President Donald Trump canceled all meetings with Iranian officials and promised protesters that help was on the way. Security forces in the Islamic Republic reportedly suppressed widespread protests, killing hundreds. Trump has repeatedly threatened to intervene if the government kills protesters.
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.
