WTI slips below $97.00 ahead of Trump-Xi meeting

WTI falls as traders await the high-stakes Beijing summit between President Donald Trump and President Xi Jinping.
Trump and Xi may lower tariffs on $30 billion of non-sensitive goods, excluding items vital to national security.
EIA data shows Hormuz oil flows fell nearly 6 million barrels daily in Q1 due to the Middle East conflict.

Akhtar Faruqui FXStreet

West Texas Intermediate (WTI) crude oil price continues to slide for a second straight day, trading near $96.80 per barrel during Asian market hours on Thursday. This decline comes as traders exercise caution ahead of a pivotal summit in Beijing between US President Donald Trump and Chinese President Xi Jinping.

The meeting marks the first state visit to China by a US leader in nine years. As the world’s two largest economies attempt to stabilize their relationship, they are reportedly considering a framework to reduce tariffs on roughly $30 billion worth of goods, excluding those tied to national security.

However, geopolitical tensions remain a major factor. The summit is taking place against the backdrop of the war in Iran. Washington has recently increased pressure on Tehran by imposing new sanctions on entities involved in selling Iranian oil to China and threatening banks that facilitate those transactions.

Oil supply concerns also loom over the market. According to the US Energy Information Administration (EIA), crude and fuel flows through the Strait of Hormuz dropped by nearly 6 million barrels per day in the first quarter following the outbreak of the Middle East conflict in late February.

Furthermore, the International Energy Agency (IEA) warned that the global oil market will likely face a significant undersupply until October, even if the conflict ends as early as next month. This is compounded by news from Saudi Arabia, which informed OPEC that its oil production has fallen to its lowest level since 1990.

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

Akhtar Faruqui

FXStreet

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

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