WTI retreats further from one-week top set on Wednesday, slides to $71.70 area

WTI attracts some sellers on Thursday and snaps a three-day winning streak to a one-week high.
Indications of a rise in US Crude inventories and worries about Trump’s tariffs weigh on Oil prices.
Concerns over supply disruption in Russia and a weaker USD could lend support to the black liquid.

Haresh Menghani FXStreet

West Texas Intermediate (WTI) US Crude Oil prices extend the overnight pullback from the vicinity of the $73.00 mark, or a one-week top, and drift lower during the Asian session on Thursday. The commodity slides to the $71.75 area, or a fresh daily low in the last hour, and for now, seems to have snapped a three-day winning streak.

Market sources, citing the American Petroleum Institute (API) report, said on Wednesday that US Crude stocks rose by 3.34 million barrels last week. This, along with concerns that US President Donald Trump's trade tariffs could weaken the global economy and dent fuel demand, fails to assist Crude Oil prices to capitalize on a three-day-old recovery from the year-to-date low touched earlier this week.

Apart from this, worries about slowing demand from the Eurozone and China exert additional pressure on the black liquid. That said, supply disruptions in Russia could help limit deeper losses. In fact, Russia said that oil flows from the Caspian Pipeline Consortium – a major route for crude exports from Kazakhstan – were reduced by 30%-40% after a Ukrainian drone attack on pumping stations.

Furthermore, the emergence of some US Dollar (USD) selling, despite the Federal Reserve's (Fed) hawkish outlook, could act as a tailwind for Crude Oil prices. Traders now look forward to the release of the official US Crude inventories data, due later during the North American session. Nevertheless, the mixed fundamental backdrop warrants some caution before placing aggressive directional bets.

(This story was corrected on February 20 at 11:44 GMT to say that WTI seems to have snapped a three-day winning streak, not a losing streak.)

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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