WTI drops below $75.50 as facing challenges due to Trump policies
- WTI price depreciated as US President Donald Trump reaffirmed his proposal for a 10% tariff on imports from China.
- Oil prices declined as markets assessed the impact of President Trump’s declaration of a national energy emergency.
- US sanctions on Russia have disrupted physical Oil and tanker markets, providing support to Oil prices.
West Texas Intermediate (WTI) Oil price declines for the fifth consecutive session, trading near $75.40 per barrel during European trading hours on Wednesday. The drop in crude Oil prices comes after US President Donald Trump reiterated his proposal for a 10% tariff on imports from China, the world's largest Oil importer.
Although the proposed 10% tariff is considerably lower than the previously threatened 60%, it aligns with Trump’s campaign promise. The announcement follows a recent phone call between Trump and Chinese President Xi Jinping, where they discussed key topics, including trade and the fentanyl crisis.
On the other hand, Oil prices may have found some support from Trump’s proposed 25% tariff on Canadian crude Oil imports. This measure is seen as a potential driver of higher market prices, as Canada exports nearly all its crude to the United States (US), often at a discount to WTI. “US sanctions increase the risk of higher costs for most of Canada’s oil exports,” noted Vivek Dhar, a Commonwealth Bank analyst.
Markets also weighed the potential implications of President Trump's pledges to boost Oil production. These include declaring a national energy emergency to streamline permitting, opening up additional drilling acreage, and reversing Biden-era clean energy policies.
Meantime, recent US sanctions on Russia have disrupted physical Oil and tanker markets, providing some residual support to Oil prices. Elsewhere, a severe winter storm swept across the US Gulf Coast on Tuesday, significantly impacting Oil production. North Dakota’s output dropped by an estimated 130,000 to 160,000 barrels per day (bpd), according to the state’s pipeline authority.
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.