WTI drops to near $75.00 due to uncertain potential impact of Trump’s proposed tariffs
- WTI price depreciates due to uncertainty surrounding the impact of President Trump's proposed tariffs and energy policies.
- API Weekly Crude Oil Stock rose by 1 million barrels in the previous week.
- Trump threatened to impose "high levels" of sanctions and tariffs on Russian imports.
West Texas Intermediate (WTI) Oil price extends its losing streak for the sixth successive session, trading around $74.90 during the early European hours on Thursday. Crude Oil prices decline amid uncertainty surrounding how US President Donald Trump's proposed tariffs and energy policies might affect global economic growth and energy demand.
Traders evaluate the potential impact of Trump's proposed 10% tariff on imports from China, the world's largest Oil importer and a key manufacturing hub. While the 10% tariff is significantly lower than the previously threatened 60%, it has somewhat eased market concerns. However, Trump's additional threats to impose tariffs on the European Union, as well as 25% tariffs on Canada and Mexico, continue to fuel uncertainty in the market.
The American Petroleum Institute (API) report suggested a renewed increase in US crude Oil inventories. According to the API Weekly Crude Oil Stock report, crude stockpiles rose by 1 million barrels during the week ending January 16, marking the first increase after five consecutive weeks of declines.
Crude Oil markets may also face potential supply disruptions as President Donald Trump threatened on Wednesday to impose "high levels" of sanctions on Russia and tariffs on Russian imports. Trump called for a resolution to the war in Ukraine, stating, according to CNBC.
"If we don’t make a ‘deal,’ and soon, I have no other choice but to put high levels of taxes, tariffs, and sanctions on anything being sold by Russia to the United States (US) and various other participating countries," he wrote on Truth Social.
In related news, Saudi Arabia's crude Oil exports reached an eight-month high in November, increasing by 4.7% to 6.2 million barrels per day (bpd), up from 5.9 million bpd in October. However, crude production saw a slight decline, slipping to 8.9 million bpd from 9 million bpd.
Meanwhile, several ports in Texas began reopening on Wednesday following disruptions caused by Winter Storm Enzo earlier this week, which had significantly impacted shipping and energy operations in the region.
WTI Oil FAQs
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.
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.
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.
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.