West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $57.65 during early European trading hours on Monday. The price of West Texas Intermediate crude rose after US President Donald Trump said he would not rule out war with Venezuela, raising uncertainty about supply. Traders are bracing for the release of the American Petroleum Institute (API) crude oil inventories report on Tuesday for fresh momentum.
The United States is still pursuing a third oil tanker near Venezuela as Trump intensifies an oil blockade of Nicolas Maduro’s government, NBC reported Sunday. Another official confirmed that the tanker was subject to sanctions but reiterated that it had not yet been boarded and that interceptions could take several forms, including sailing or flying close to vessels of concern.
“The market is waking up to the fact that the Trump administration is taking a hard-line approach to Venezuelan oil trade,” said John Goh, senior oil market analyst at Sparta Commodities.
On the other hand, rising expectations that the US Federal Reserve will deliver further interest rate cuts after signs of lower US inflation and cold jobs reports could weigh on the US dollar and boost prices of US dollar-denominated goods.
Financial markets expect a roughly 21.0% chance that the Fed will cut interest rates at its next meeting in January, after it cut them by a quarter point at each of its last three meetings, according to the CME FedWatch tool.
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.
