The price of West Texas Intermediate (WTI) oil has been on a downward slide for the past five sessions, with trading settling around $75.40 per barrel during the European hours on Wednesday. This decline has been partly attributed to U.S. President Donald Trump once again proposing a 10% tariff on imports from China, who happens to be the globe’s largest oil consumer.
While this 10% tariff is definitely less than the previously floated 60% tariff, it stays true to Trump’s campaign promises. This announcement closely followed a conversation between Trump and China’s President Xi Jinping, where they touched upon essential issues like trade and the fentanyl problem.
Interestingly enough, oil might be finding some support thanks to Trump’s proposal of slapping a 25% tariff on Canadian crude oil imports. Seeing as Canada sends almost all its crude to the U.S., typically at a discount to WTI prices, this move could potentially keep market prices buoyant. Vivek Dhar, an analyst with Commonwealth Bank, noted that “US sanctions increase the risk of higher costs for most of Canada’s oil exports.”
Meanwhile, the market has also been contemplating Trump’s promises regarding an increase in oil production. His agenda includes declaring a national energy emergency to speed up the permitting process, opening more areas for drilling, and rolling back clean energy policies from the Biden administration.
Additionally, recent U.S. sanctions on Russia have thrown a wrench in the physical oil and tanker markets, which has lent some lingering support to oil prices. A severe winter storm that barreled through the U.S. Gulf Coast on Tuesday also affected oil production significantly, leading to a notable decrease in North Dakota’s output by about 130,000 to 160,000 barrels per day, according to the state’s pipeline authority.
WTI Oil FAQs
West Texas Intermediate, or WTI, is a type of crude oil traded internationally. Known for being "light" and "sweet" due to its low density and sulfur content, it’s highly valued because it refines easily. Originating in the United States, it is distributed via the Cushing hub, often dubbed "The Pipeline Crossroads of the World." WTI is a standard reference for the oil market, and its price features frequently in the media.
Supply and demand drive WTI oil prices, influenced by global economic conditions. Political instability, wars, and sanctions can disrupt oil supply, impacting prices. Decisions by OPEC, a major coalition of oil-producing nations, also significantly affect prices. Since oil is mostly traded in U.S. dollars, the currency’s value can sway the price – a weaker dollar makes oil cheaper, and a stronger dollar does the opposite.
Weekly oil inventory reports from the American Petroleum Institute (API) and the Energy Information Agency (EIA) play a crucial role in shaping WTI oil prices. Changes in inventories can signal shifts in supply and demand. A drop in inventories typically hints at increased demand, boosting prices, while higher inventories suggest a supply surplus, potentially lowering prices. API releases its report on Tuesdays, and EIA follows on Wednesday. The EIA’s data is generally seen as more reliable because it’s a government source, with API results usually aligning closely, within 1% most of the time.
OPEC, the Organization of the Petroleum Exporting Countries, consists of 12 oil-producing nations that set production quotas during their semi-annual meetings. These decisions often influence WTI oil prices. Reducing quotas can tighten supply and elevate prices, while boosting production can do the opposite. OPEC+ is an expanded group that includes ten additional non-OPEC members, with Russia being a notable participant.
