WTI rises to near $63.00 on large US inventories drawdown

WTI price gains traction to near $63.00 in Thursday’s early European session.
EIA showed US crude inventories fell by 6 million barrels last week.
Oil traders will closely monitor talks on the Ukraine peace deal.

Lallalit Srijandorn FXStreet

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $63.00 during the early European trading hours on Thursday. The WTI climbs as US crude inventories fell more than expected. Traders will closely monitor developments surrounding talks to end the Ukraine war, with sanctions on Russian crude remaining in place for now.

US crude inventories are experiencing a sharp decline that exceeded expectations, signaling stable demand in the world’s largest oil consumer. According to the US Energy Information Administration (EIA) weekly report, crude oil stockpiles in the US for the week ending August 15 fell 6.014 million barrels, compared to a rise of 3.036 million barrels in the previous week. The market consensus estimated that stocks would decrease by 1.3 million barrels.

"Crude oil prices rebounded as signs of strong demand in the U.S. boosted sentiment," said Daniel Hynes, senior commodity strategist at ANZ.

Furthermore, uncertainty over efforts to end the war in Ukraine also lends support to the WTI price. US President Donald Trump said on Tuesday that he had ruled out putting US troops on the ground in Ukraine but said the country might provide air support as part of a deal to end Russia's war in the country.

Russia warned that resolving security issues without Moscow's involvement is a "road to nowhere." Analysts expect oil prices to decline once a peace deal is reached, but any continued lack of concrete progress in negotiations could underpin the WTI price.

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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