WTI holds steady above $73.50 amid stronger US Dollar, potential supply disruptions
- WTI price trades on a flat note near $73.65 in Friday’s early Asian session.
- A firmer Greenback undermines the USD-denominated WTI price.
- Potential supply disruptions due to geopolitical tensions and increasing demands could cap the downside for WTI.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $73.65 on Friday. The WTI price flat lines as the stronger US Dollar (USD) broadly offsets concerns over supply disruptions.
A strengthening of the USD on the cautious stance of the US Federal Reserve (Fed) undermines the WTI price as it makes oil more expensive for holders of other currencies.
FOMC Minutes released on Wednesday showed that the Fed policymakers expressed concern about inflation and the impact that President-elect Donald Trump’s policies could have. Fed officials indicated that they would be moving more slowly on rate reductions because of the uncertainty.
On the other hand, mounting concerns over supply disruptions and increasing demands could support the black gold. The Biden administration plans to impose more sanctions on Russia's oil exports ahead of Donald Trump's inauguration on January 20.
Data released by the American Petroleum Institute (API) and the Energy Information Administration (EIA) earlier this week showed the US oil inventory declined last week, signalling rising energy demand amid a harsh winter in the US, Europe, and Asia.
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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