WTI falls toward $72.00 as traders await clarity on US trade policy
- WTI price faces challenges as traders adopt caution amid rising uncertainty over US trade policy.
- Trump’s commerce secretary nominee Howard Lutnick suggested that Canada and Mexico could avoid tariffs.
- Oil prices struggled as the EIA reported a 3.463 million-barrel increase in US stockpiles for the previous week.
West Texas Intermediate (WTI) crude Oil price continues to decline for the second consecutive session, trading around $72.20 per barrel during early European hours on Thursday. Investors remain cautious as uncertainty looms over United States (US) trade policy, following conflicting statements from the White House regarding President Donald Trump’s proposed tariffs on Canada and Mexico—two key crude suppliers to the United States.
White House spokeswoman Karoline Leavitt confirmed on Tuesday that Trump remains committed to implementing tariffs on Canada and Mexico as planned on Saturday. On Wednesday, Trump’s commerce secretary nominee, Howard Lutnick, suggested that Canada and Mexico could avoid tariffs if they swiftly tighten border controls on fentanyl and curb China’s advancements in artificial intelligence. Lutnick advocates for broad, across-the-board tariffs targeting countries rather than specific products, reinforcing a more aggressive stance toward China.
Crude Oil prices also remain under pressure after the Energy Information Administration (EIA) reported a 3.463 million-barrel increase in US stockpiles for the week ending January 24. This marks the first inventory build after nine consecutive weeks of declines, aligning closely with analysts’ expectations of a 3.19 million-barrel rise. The recent winter storms across the US have further dampened Oil demand.
On the supply front, Russia's crude Oil exports from western ports are expected to decline by 8% in February compared to January, as Moscow ramps up refining operations. The drop comes amid fresh US sanctions, which have tightened restrictions on Russian crude exports.
Meanwhile, Oil prices could face additional headwinds due to the Federal Reserve’s (Fed) cautious monetary policy approach. As widely anticipated, the Fed maintained its benchmark interest rate at 4.25%-4.50% during its January meeting. Elevated borrowing costs typically weigh on economic activity, subsequently reducing Oil demand.
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.