WTI attracts some buyers above $63.50 on optimism around US-China trade talks

WTI price gains ground to near $63.80 in Wednesday’s Asian session.
Optimism around US-China trade talks supports the WTI price.
US crude oil inventories unexpectedly declined in the week ended June 6, according to the API.

Lallalit Srijandorn FXStreet

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $63.80 during the Asian trading hours on Wednesday. The WTI price edges higher as traders digest the result of trade talks between the United States and China. The US May Consumer Price Index (CPI) inflation and the EIA Crude Oil stockpiles report will be the highlights later on Wednesday.

Bloomberg reported early Wednesday that the US and China agreed to a preliminary deal on how to implement the consensus the two sides reached in Geneva. US negotiators stated that they “absolutely expect” that issues around shipments of rare earth minerals and magnets will be resolved with the framework implementation, even though the full details of their agreement weren’t immediately available. Analysts expect a trade deal between the world's two biggest economies could underpin the WTI price by boosting global economic growth and increasing oil demand.

The American Petroleum Institute (API) weekly report showed crude oil stockpiles in the US for the week ending June 6 declined by 370,000 barrels, compared to a fall of 3.3 million barrels in the previous week. The market consensus estimated that stocks would increase by 700,000 barrels.

On the other hand, Iran said it would soon make a counter-proposal for a nuclear deal in response to a US offer that Tehran deems "unacceptable," per Reuters. Any signs of easing US sanctions on Tehran should allow Iran to export more oil, which might cap the upside for the crude prices.

WTI Oil FAQs

What is WTI Oil?

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.

What factors drive the price of WTI Oil?

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.

How does inventory data impact the price of WTI Oil

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.

How does OPEC influence the price of WTI Oil?

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.

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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