WTI falls to near $65.50 as prevailing trade tensions boost demand concerns

WTI price struggles as persistent trade tensions heighten concerns over the global demand outlook.
Traders expect updates on US-EU trade negotiations this week.
Indonesia’s sovereign wealth fund, Danantara, is set to sign an $8 billion contract with US engineering firm KBR Inc.

Akhtar Faruqui FXStreet

West Texas Intermediate (WTI) Oil price extends its losses for the third successive session, trading around $65.50 during European hours on Tuesday. The price of the black gold depreciates as ongoing trade tensions boost fears about the demand outlook.

Traders adopt caution ahead of US President Donald Trump's August 1 tariff deadline. Market participants await further updates on the trade negotiations between major crude consumers, the United States (US) and the European Union (EU), this week, expecting a final trade deal to be concluded before the deadline

Trump threatened to hit the EU’s exports with 30% tariffs. In response, the European bloc is exploring a broader set of possible counter-measures against the US as prospects for an acceptable trade agreement with Washington fade, Reuters cited EU diplomats.

Reuters reported on Tuesday that Indonesian sovereign wealth fund Danantara plans to sign an $8 billion contract with US engineering firm KBR Inc. to build 17 modular refineries. The deal resulted in a reduction of the proposed US tariff rate from 32% to 19%.

Oil price faces challenges as supply concerns ease, with major producers raising output. Joint Organizations Data Initiative showed that Saudi Arabia's crude Oil exports in May rose to their highest in three months.

Additionally, supply pressures have further subsided following the ceasefire on June 24 ended the conflict between Israel and Iran. Moreover, Iran announced on Monday that it will restart nuclear negotiations with European nations this week, aiming to revive the 2015 nuclear deal and prevent the reinstatement of international sanctions.

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

Akhtar Faruqui

FXStreet

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

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