WTI maintains position above $72.00 due to rising Oil supply concerns
- WTI price holds gains as Russian Oil production in January fell further below the country’s OPEC+ quota.
- Oil prices experience resistance amid rising trade tensions and economic uncertainty following US tariffs on steel and aluminum imports.
- Geopolitical tensions increase as Trump urges Israel to end ceasefire with Hamas if hostages are not returned by the weekend.
West Texas Intermediate (WTI) crude Oil price continues its upward trend for the third straight day, trading around $72.20 during Asian hours on Tuesday. The rise in crude Oil prices is supported by concerns over increasing supply risks.
However, the upside of the WTI price remains limited due to growing trade tensions and economic uncertainty following US President Donald Trump’s decision to impose a 25% tariff increase on steel and aluminum imports. This move raises concerns about global economic growth and energy demand in the United States (US), the world’s largest Oil consumer.
According to Bloomberg, undisclosed sources indicate that Russian Oil production in January fell further below the country’s OPEC+ quota, with output dropping to 8.962 million barrels per day—16,000 barrels below its target under the OPEC+ agreement.
Meanwhile, new US sanctions target individuals and tankers transporting Iranian crude to China, intensifying pressure on Tehran. Iranian President Masoud Pezeshkian has called for OPEC members to unite against potential US sanctions, following Trump’s announcement of plans to reduce Iran’s oil exports to zero.
Geopolitical tensions in the Middle East could further support crude Oil prices. Trump has urged Israel to end its ceasefire with Hamas if hostages are not returned by the weekend, increasing the risk of renewed conflict as both sides accuse each other of violating the agreement.
Additionally, a Reuters poll of economists suggests the Federal Reserve may postpone interest rate cuts until next quarter due to inflation concerns. Many analysts who had anticipated a rate cut in March have now adjusted their forecasts, with most predicting at least one cut by June. Higher interest rates could slow economic growth in the US, the world’s largest Oil consumer, potentially dampening oil demand.
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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