WTI drifts higher above $57.00 on Venezuela turmoil
- WTI price gains momentum to near $57.30 in Monday’s early Asian session.
- The US capture of Venezuelan President Nicolas Maduro has lifted the WTI price in the near term.
- OPEC+ decided to keep oil output steady amid turmoil among members.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $57.30 during the early Asian trading hours on Monday. The WTI price edges higher amid geopolitical tensions. Traders brace for the release of the American Petroleum Institute (API) crude oil stockpiles report on Tuesday for fresh impetus.
The US President Donald Trump administration called a “large-scale strike against Venezuela” and captured its president Maduro to face charges, per CNN. This action came without the approval of Congress. Trump further stated that the US will be running Venezuela until it can do a safe, proper, and judicious transition. US Secretary of State Marco Rubio said on Sunday that the administration will use leverage over oil to force further change in Venezuela.
Concern that supply may be disrupted after the US snatched the Venezuelan leader from Caracas at the weekend, and Trump said Washington would take control of the oil-producing nation, boosting the WTI price.
"Prices may see modest upside on heightened geopolitical tensions and disruption risks linked to Venezuela and Iran, but ample global supply should continue to cap those risks for now," said Ole Hansen, head of commodities research at Saxo Bank.
The Organization of the Petroleum Exporting Countries and its allies (OPEC+) kept oil output unchanged on Sunday while avoiding the discussions of the geopolitical crises affecting several of the producer group's members. The group will next meet again on February 1, OPEC+ said.
The API crude oil stockpiles report will be the highlight on Tuesday. A larger-than-expected crude oil inventory draw indicates stronger demand and could boost the WTI price, while a bigger build than estimated signals weaker demand or excess supply, 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.