West Texas Intermediate (WTI) Oil price holds ground after registering modest losses in the previous trading session, hovering near $57.50 during the Asian hours on Friday. Traders are awaiting Sunday’s virtual meeting of the Organization of the Petroleum Exporting Countries and its allies (OPEC+), with expectations that the group will uphold its November decision to pause further production increases.
Oil prices could edge higher on potential supply concerns amid escalating geopolitical tensions. Ukrainian drones reportedly struck Russian Oil facilities, while Russia and Ukraine exchanged accusations of civilian attacks on New Year’s Day, despite intensive talks overseen by US President Donald Trump aimed at ending the nearly four-year conflict.
Reuters reported that the US Treasury Department announced sanctions on Wednesday against Oil traders accused of helping Venezuela’s Maduro government evade restrictions, including four tankers allegedly part of a so-called “shadow fleet.”
The Panama-flagged Nord Star, the Guinea-flagged Lunar Tide, and the Hong Kong-flagged Della, all sanctioned on Wednesday, have transported Venezuelan crude or fuel this year to destinations in Asia and the Caribbean.
The measures are preventing sanctioned vessels from entering or leaving Venezuela, forcing the state Oil company PDVSA to adopt extreme measures to avoid refinery shutdowns as residual fuel inventories accumulate.
US Energy Information Administration (EIA) data showed US crude inventories fell by 1.934 million barrels last week, the largest draw since mid-November and well above expectations for a 0.9 million-barrel decline.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. 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 impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
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