West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $59.50 during Asian trading hours on Thursday. West Texas Intermediate crude rose amid a larger-than-expected draw from US crude inventories last week due to higher refinery runs and exports.
Data released by the Energy Information Administration (EIA) on Wednesday showed that US crude oil inventories for the week ending November 14 fell by 3.426 million barrels compared to a rise of 6.413 million barrels in the previous week. This figure was lower than the market consensus of -1.9 million barrels. US crude oil inventories are about 5% below the five-year average for this time of year.
However, a renewed push to end the Russia-Ukraine war may limit the upside for the WTI price. US President Donald Trump’s administration has signaled to Ukrainian President Volodymyr Zelensky that his team must accept a US-drafted framework for ending the war with Russia, which proposes that Kiev give up territory and some weapons, according to Reuters. The end of the war in Ukraine could open the door to increased flows of Russian oil, raising fears of oversupply.
Meanwhile, investors reduced their expectations for a rate cut from the Fed at the December meeting due to uncertainty. Markets are now pricing in a less than 30% chance of a 25 basis point cut in interest rates next month, down from more than 60% earlier this month, according to the CME FedWatch tool. Higher interest rates for a longer period generally lifts the US dollar (USD) and affects the price of WTI, because it makes US dollar-denominated goods more expensive for foreign buyers.
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.
