WTI flat lines below mid-$59.00s amid US-EU trade war fears, easing Iran supply concerns

WTI struggles to lure buyers amid worries that a US-EU trade war would impact demand.
The USD reverses a part of Monday’s slide from a one-month top and caps the commodity.
Easing concerns about supply disruption from Iran acts as a tailwind for the black liquid.

Haresh Menghani FXStreet

West Texas Intermediate (WTI) US Crude Oil prices struggle to capitalize on the previous day's modest bounce from the vicinity of mid-$58.00s, or a one-week trough, and oscillate in a narrow range during the Asian session on Tuesday. The commodity currently trades just below mid-$59.00s, nearly unchanged for the day amid mixed cues.

US President Donald Trump seems to have stepped back from earlier threats of intervention in Iran, reducing the likelihood of a US attack and easing concerns about supply disruption from a major oil producer. This, in turn, is seen acting as a tailwind for Crude Oil prices, though worries that a trade war between the US and Europe could impact demand cap the upside.

In fact, Trump vowed on Saturday that he would impose additional tariffs on goods from eight European nations that stand in his way to acquire Greenland. Major European Union states condemned the tariff threats over Greenland as blackmail and are preparing with a range of previously untested economic countermeasures should the duties go ahead on February 1.

This comes on top of heightened geopolitical uncertainties and continues to weigh on investors' sentiment. The anti-risk flow, along with reduced bets for two more rate cuts by the US Federal Reserve (Fed) assists the safe-haven US Dollar (USD) to stall the overnight pullback from the highest level since December 9. This, in turn, further contributes to capping the black liquid.

Traders now look forward to the final US Q3 GDP report, which, along with the US Personal Consumption Expenditure (PCE) Price Index, would provide more cues about the Fed's rate-cut path and drive the USD demand. Apart from this, geopolitical headlines and developments surrounding the Greenland saga should provide some meaningful impetus to Crude Oil 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

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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