WTI US Oil slips as Venezuela's political turmoil, API inventory report loom
- WTI US Oil prices edge lower on Tuesday after a hesitant start to the week.
- Investors assess the potential impact of political developments in Venezuela on Crude Oil supply.
- The API Crude Oil inventory weekly report is due later in the day.
West Texas Intermediate (WTI) US Oil trades around $57.50 at the time of writing on Tuesday, down 1.25% on the day. The WTI price remains under pressure as markets try to gauge the possible consequences of recent political events in Venezuela on global Oil supply.
Traders remain cautious amid uncertainty surrounding Venezuelan Crude Oil flows following the intervention by the United States (US) and the capture of Venezuelan President Nicolas Maduro. While Washington has signaled plans to take control of the country’s Oil industry and involve US companies in its revival, the immediate impact on Oil prices appears limited. Market participants believe that any meaningful recovery in production would take time and require substantial investment.
According to Priyanka Sachdeva, Senior Market Analyst at Phillip Nova, the relatively muted reaction of Oil prices to major geopolitical events, such as US intervention in Venezuela or ongoing strikes on Russian energy infrastructure, suggests that supply and demand fundamentals remain the key driver for the market. This view helps cap upside moves in WTI despite the tense geopolitical backdrop.
Against this background, investors continue to closely monitor any developments that could signal either increased disruption or a gradual normalization of Venezuelan supply. Clear signs of rising tensions could support WTI prices in the near term, while expectations of higher supply would add further downward pressure on prices.
Market attention is also turning to the release of the American Petroleum Institute (API) Crude Oil stockpiles report later in the day.
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.