The price of West Texas Intermediate (WTI) crude oil lost its daily gains and is extending losses for the second straight session, trading around $60.10 an ounce during the early European hours on Thursday. Crude oil prices remain low amid easing fears of an imminent US military strike on Iran.
US President Donald Trump said that reports indicate that killings linked to the crackdown in Iran are subsiding and that there are no plans for large-scale executions, but he did not rule out possible US military action, indicating that Washington will continue to monitor developments, according to Reuters.
Reuters quoted Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment Company, as saying that selling pressure dominated amid expectations that the United States would refrain from taking military action against Iran. Kikukawa added that the bearish sentiment was reinforced by a larger-than-expected increase in US crude inventories. While geopolitical risks remain high and unforeseen events may disrupt the supply-demand balance, he said WTI is likely to trade in the $55-65 range for now.
Oil prices remain under pressure as US crude inventories increase. The Energy Information Administration (EIA) weekly report showed that US crude oil inventories rose by 3.391 million barrels in the week ending January 14, reversing a decline of 3.831 million barrels in the previous week. This contradicts market expectations of a withdrawal of about 2.2 million barrels.
In addition, Venezuela has begun to roll back oil production cuts imposed under the US embargo as crude oil exports resume. An administration official said that proceeds from initial oil shipments, estimated at about $500 million, are held in bank accounts controlled by the US government.
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.
