WTI holds positive ground above $71.50 as API reports draw in crude inventories
- WTI price posts modest gains near $71.60 in Thursday’s early European session.
- US crude oil inventories dropped by 1.442 million barrels last week, according to the API.
- A slower path of the Fed easing cycle and the weak Chinese demand could weigh on the WTI.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $71.60 on Thursday. The WTI price trades with mild gains after the American Petroleum Institute (API) weekly report showed US crude stockpiles continued to shrink.
A fall in US crude inventories last week provides some support to the WTI. The API weekly report showed crude oil stockpiles in the United States for the week ending December 27 declined by 1.442 million barrels, compared to a fall of 3.2 million barrels in the previous week. The market consensus estimated that stocks would decrease by 3.0 million barrels. Furthermore, the escalating geopolitical tensions in the Middle East and ongoing Russia-Ukraine conflicts could boost the WTI price in the near term.
On the other hand, the expectation that the US Federal Reserve (Fed) would slow the pace of the interest rate cuts in 2025 due to stubbornly high inflation might cap the upside for the black gold. The Fed officials indicated that it probably would only lower twice more in 2025. This, in turn, lifts the Greenback and exerts some selling pressure on the USD-denominated commodity price as it makes oil more expensive in other countries, which can reduce demand.
The recent data released on Thursday showed that China’s factory activity slowed its pace of expansion and came in weaker than expected in December. This reading raised concerns over a slowing economic recovery and weak demand in the world's second-largest economy, which might drag the WTI price lower.
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.