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23 Jan 2025

WTI extends downside to near $75.00 amid uncertainties

  • WTI price edges lower to around $75.00 in Thursday’s early Asian session.
  • Trump tariff threats weigh on the WTI price.
  • API reported an unexpected crude oil inventory build last week. 

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $75.00 on Thursday. The WTI price extends its decline to a fresh one-week low as traders assess how US President Donald Trump’s proposed tariffs could affect the global energy demand and economy. 

Trump said on Monday that he was considering imposing 25% tariffs on Canada and Mexico while discussing imposing a 10% tariff on goods imported from China on February 1. Tariffs could potentially slow economic growth and drag the black gold lower. 

"Possible sanctions under the new Trump administration remain unclear, with possible tariffs related to Canada and Mexico now seemingly at the forefront of trader uncertainties," said analysts at energy advisory firm Ritterbusch and Associates.

The American Petroleum Institute (API) weekly report showed crude oil stockpiles in the United States for the week ending January 16 increased by a million barrels, compared to a decline of 2.6 million barrels in the previous week.

Crude oil inventories dropped by more than 12 million barrels in 2024, according to the API, with the downward trend continuing beyond the new year.  

On Tuesday, the US Energy Information Administration (EIA) suggested that Oil prices are expected to decline this year and next as weak economic activity and energy transition efforts weighed heavily on the US and China. "Strong global growth in production of petroleum and other liquids and slower demand growth put downward pressure on prices," according to EIA economists.

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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