WTI declines below $61.50 as trade war escalates
- WTI price slumps to $61.45 in Thursday’s Asian session.
- The ongoing US-China trade war undermines the WTI price.
- Crude oil stockpiles in the US rose by 2.553 million barrels last week, according to the EIA.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $61.45 during the early Asian session on Thursday. The WTI price tumbles amid the escalating trade war between the US and China, and fears of a slowdown in economic growth and energy demand.
The renewed trade tensions raise serious questions about future oil demand, weighing on the black gold price. US President Donald Trump raised the tariff on Chinese imports to 125% on Wednesday, hours after China increased the duty on American goods to 84% on all US imports. “China’s aggressive retaliation diminishes the chances of a quick deal between the world’s two biggest economies, triggering mounting fears of economic recession across the globe,” Rystad Energy Vice President for oil markets, Ye Lin, told Reuters.
The Energy Information Administration weekly report showed crude oil stockpiles in the US for the week ending April 4 rose by 2.553 million barrels, compared to a jump of 6.165 million barrels in the previous week. The market consensus estimated that stocks would increase by 2.2 million barrels.
On the other hand, the downside for the WTI might be capped due to the Keystone oil pipeline shutdown. The Keystone oil pipeline from Canada to the US remained shut on Wednesday following an oil spill near Fort Ransom, North Dakota, while plans to return it to service were being evaluated, its operator South Bow said.
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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