The price of West Texas Intermediate (WTI) crude oil is losing ground for the second straight session, trading around $55.80 per barrel during Asian hours on Friday. Crude oil prices are on track for a second straight weekly decline, as hopes for a peace deal between Russia and Ukraine outweigh concerns about supply disruptions.
US President Donald Trump said on Thursday that negotiations to end the war in Ukraine are “getting closer to something”, ahead of a planned US meeting with Russian officials this weekend.
Meanwhile, traders remain uncertain about how Washington will implement Trump’s pledge to block sanctioned tankers from entering and exiting Venezuela, which accounts for about 1% of global oil supplies.
In an unprecedented move, the US Coast Guard seized a Venezuelan oil tanker last week. Venezuela on Thursday allowed two unlicensed very large crude tankers to leave for China, Reuters reported, citing sources familiar with the country’s oil export operations.
The US is also moving to tighten sanctions on the Russian energy sector to support peace efforts in Ukraine, while the UK has imposed sanctions on three small Russian oil producers. Additional measures targeting Russian oil could pose a greater risk to supply than Trump’s proposed blockade of Venezuelan tankers.
On December 16, oil prices fell to their lowest level in nearly five years, under pressure from expectations of abundant supplies as OPEC+, the Organization of the Petroleum Exporting Countries and its allies, gradually restore closed production capacity and non-OPEC producers increase production. Early signs of weak demand are also beginning to appear among major consumers, including China and the United States, which has led to oil prices falling by about 20% this year.
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.
