WTI drifts lower to near $63.50 amid US demand concerns

WTI price declines to near $63.60 in Thursday’s early Asian session.
A build of US distillate stocks raises demand worries, weighing on the WTI price.
Supply-side risks from Russia might cap the downside for the WTI.

Lallalit Srijandorn FXStreet

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $63.60 during the early Asian trading hours on Thursday. The WTI edges lower as data showing an increase in US diesel stockpiles stoked worries about demand. However, the persistent geopolitical tensions might help limit the black gold’s losses.

US crude oil stocks posted a large decline last week, indicating stronger demand. Data released by the US Energy Information Administration (EIA) on Wednesday showed that crude oil stockpiles in the US for the week ending September 12 fell by 9.285 million barrels, compared to a rise of 3.939 million barrels in the previous week. The market consensus estimated that stocks would decline by 1.5 million barrels.

Nonetheless, distillate stocks increased by 4.0 million barrels, raising demand concerns and undermining the WTI price. "Looks like markets are responding on diesel, which is the soft underbelly of the entire complex," said Phil Flynn, a senior analyst at Price Futures Group.

Russian oil supply risks will be closely watched after Ukraine's attacks on Russia's energy infrastructure intensified in recent weeks. Reuters reported earlier on Tuesday that Russia's oil pipeline monopoly, Transneft, which handles more than 80% of the country's oil, warned producers they may have to cut output following Ukraine's drone attacks on critical export ports and refineries. Russian supply disruption risks could lift the WTI price in the near term.

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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