WTI edges lower below $56.50 on US Dollar strength, weak China demand
|- WTI price edges lower to near $56.30 in Thursday’s early European session.
- Renewed US Dollar demand and signs of weak Chinese energy demand weigh on the WTI price.
- Venezuelan navy escorts vessels in defiance of Trump’s blockade threat, per the New York Times.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $56.30 during the early European trading hours on Thursday. The WTI price declines amid a modest rebound in the US Dollar (USD) and signs of weak Chinese energy demand.
The Greenback recovers some lost ground amid cautious comments from the Federal Reserve (Fed) officials this week, which weigh on the USD-denominated commodity price. Fed Governor Christopher Waller on Wednesday backed further interest-rate cuts to get the central bank’s setting back to neutral, per Bloomberg. However, Waller also warned there’s no need to rush amid elevated inflation.
Additionally, Atlanta Fed President Raphael Bostic said on Tuesday that he did not believe the decision to reduce rates last week was warranted, and he had projected no more rate cuts next year.
Soft Chinese economic data released earlier this week fueled concerns about global energy demand, as China is the world’s largest crude importer. China’s Retail Sales rose 1.3% YoY in November, compared to 2.9% in October, according to the National Bureau of Statistics (NBS) on Monday. This figure came in weaker than the market expectation of 2.9%. The country’s Industrial Production climbed 4.8% YoY in the same period, versus 5.0% forecast and 4.9% prior.
On the other hand, the US blockade of Venezuela might cap the downside for the WTI. US President Donald Trump said the US will block sanctioned tankers from entering and leaving Venezuela. The Venezuelan government on Wednesday ordered its Navy to escort ships carrying petroleum products from port, escalating the risk of a confrontation with Trump ordered a “blockade” aimed at the country’s oil industry.
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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