WTI rises as US Crude Oil stockpiles drop sharply, Venezuelan exports eyed

WTI US Oil prices recover following the release of much stronger-than-expected inventory data.
Weekly figures show a steep drop in US Crude Oil stockpiles, signaling firmer demand.
Developments around Venezuelan Oil exports and US macroeconomic data remain in focus.

Ghiles Guezout FXStreet

West Texas Intermediate (WTI) US Oil trades around $56.70 on Thursday at the time of writing, up 0.90% on the day. WTI prices rebound, supported by the release of inventory data showing a sharp decline in US Crude Oil stockpiles.

According to weekly data published by the US Energy Information Administration (EIA), Crude Oil inventories fell by 3.831 million barrels in the week ended January 2. This drop is significantly larger than the previous week’s decline and stands in sharp contrast with market expectations, which had pointed to a build in stocks. A larger-than-expected drawdown in inventories is generally seen as a sign of stronger demand, providing immediate support to Oil prices.

However, the upside potential for WTI remains partly capped by geopolitical and policy developments. US President Donald Trump said that Venezuela would export around $2 billion worth of Oil to the United States (US). The US administration also indicated that it intends to retain long-term control over Venezuelan Oil sales and related revenues, with the stated goal of stabilizing the country’s economy and rebuilding its energy sector. These announcements fuel concerns about additional supply entering the North American market, which could limit further price gains.

Investors are also closely monitoring US macroeconomic indicators. The US employment report for December, due later on Friday, is a key event for markets. Job growth is expected to be moderate, alongside a slight decline in the unemployment rate. Any signs of a slowdown in the US labor market could weigh on the US Dollar (USD) and, through standard market dynamics, support dollar-denominated commodities such as Oil.

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

Ghiles Guezout

FXStreet

Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.

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