WTI tumbles below $66.00 amid ongoing trade jitters
- WTI price slumps to near $65.75 in Friday’s early Asian session.
- Oversupply concerns, huge crude stock inventory in the US and tariff threats weigh on the WTI price.
- Escalating geopolitical tensions in the Middle East might help limit the oil price’s losses.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $65.75 during the early Asian trading hours on Friday. The WTI price tumbles amid concerns about a supply hike for August by OPEC+, a surprise increase in US crude inventories, and intensifying US tariff pressures.
The Organization of the Petroleum Exporting Countries and allies (OPEC+) agreed at a July 6 meeting to hike their collective crude production by 548,000 barrels per day (bpd), as they continue to unwind a set of voluntary supply cuts. The group previously announced hikes of 411,000 bpd for May, June, and July, already three times faster than scheduled. Oversized output hikes have raised concerns about oversupply, which could weigh on the WTI price in the near term.
Furthermore, a huge crude stock inventory in the US might contribute to the WTI’s downside. The US Energy Information Administration (EIA) weekly report showed crude oil stockpiles in the US for the week ending July 4 rose by 7.070 million barrels, compared to an increase of 3.835 million barrels in the previous week. The market consensus estimated that stocks would decrease by 2 million barrels.
US President Donald Trump on Wednesday also announced plans for tariffs on copper, semiconductors and pharmaceuticals. Trump also imposed a 50% tariff rate on Brazil, one of the highest so far announced for the levies, which will take effect in August. Intensifying US tariff pressures could undermine the price of black gold, as tariffs can lead to trade wars, slowing down global trade and economic activity.
On the other hand, the geopolitical risks in the Middle East might cap the downside for WTI. Reuters reported that four members of the 25-member crew were killed in the Houthi attacks. Eleven people were still missing, with six of them suspected to have been kidnapped by the Houthis.
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.