WTI posts modest gain above $65.00 on rising supply concerns

WTI price trades with mild gains near $65.30 in Wednesday’s early Asian session.
The ongoing Russia-Ukraine conflict led to worries over supply-side disruptions among oil traders, supporting the WTI price.
Heightened US tariffs on Indian goods raise concerns about weaker demand, which might cap the WTI’s upside.

Lallalit Srijandorn FXStreet

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $65.30 during the early Asian trading hours on Wednesday. The WTI edges higher as concerns over supply disruptions increased following strikes on Russian energy sites by Ukraine in the ongoing Russia-Ukraine war.

Ukrainian President Volodymyr Zelenskyy said that the country intends to strike deep into Russia following a large Russian drone attack that left 60,000 Ukrainians without electricity. According to Reuters calculations, Ukrainian drone attacks have shut down facilities accounting for at least 17% of Russia's oil-processing capacity, or 1.1 million barrels per day. Concerns that intensifying airstrikes in Russia and Ukraine could lead to supply disruptions might boost the WTI price.

US President Donald Trump threatened to impose additional sanctions on Russia if no progress is made in peace talks with Ukraine. Trump further stated that he would intervene as a third party if necessary.

On the other hand, Trump’s doubling of the existing 25% duty on Indian exports raises fears of slowing trade and weaker global demand, which could weigh on the WTI price. The Trump administration imposed the additional tariff to penalize India for buying discounted Russian oil, arguing it indirectly funds Russia's war in Ukraine.

Oil traders will keep an eye on the release of the American Petroleum Institute (API) weekly crude oil stock, which will be published later on Wednesday. The attention will shift to the US Nonfarm Payrolls (NFP) report for August later on Friday. In case of the stronger-than-expected outcome, this could lift the US Dollar (USD) and drag the USD-denominated commodity price lower.

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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