During the early Asian hours on Wednesday, West Texas Intermediate (WTI), the benchmark for U.S. crude oil, is holding steady around $71.70. This rise in WTI’s price is largely attributed to the growing concerns over potential supply disruptions in Russia.
The uptick in WTI came after Ukrainian drone strikes targeted a crucial Russian pipeline’s pumping station, significantly impacting Kazakhstan’s crude exports. On Tuesday, Russian Deputy Prime Minister Alexander Novak confirmed that oil flow through the pipeline had been reduced by between 30% and 40%. According to estimates from Reuters, a 30% reduction could mean a decrease in oil supply by about 380,000 barrels each day.
However, investors should keep a close eye on the ongoing discussions around U.S. President Donald Trump’s tariff policies. The fear of a looming global trade war could put a damper on further increases in the oil market.
Recently, President Trump instructed his team to explore the possibility of imposing reciprocal tariffs on various trading partners. As of late Tuesday, Trump indicated he might impose a hefty 25% tariff on foreign cars, while higher tariffs could also be applied to semiconductor chips and pharmaceuticals.
Now, changing gears a bit, let’s talk about WTI oil itself. WTI Oil, short for West Texas Intermediate, is a major type of crude oil traded internationally, alongside Brent and Dubai Crude. Known for its “light” and “sweet” qualities due to its low gravity and sulfur content, WTI is a high-quality oil that’s easy to refine. Produced in the U.S. and distributed from the Cushing hub—often called the “Pipeline Crossroads of the World”—WTI provides a key benchmark for the oil market. Its price is frequently referenced in the media.
As with any asset, supply and demand fundamentally drive WTI Oil prices. When the global economy grows, demand tends to rise, while weaker growth can have the opposite effect. Similarly, geopolitical instability, wars, and sanctions can disrupt supply chains and influence prices. The Organization of the Petroleum Exporting Countries (OPEC) also plays a significant role in setting production targets, which can sway prices. Another factor is the U.S. Dollar’s value, as a weaker dollar tends to make oil cheaper on the global market.
Weekly oil inventory reports from the American Petroleum Institute (API) and the Energy Information Agency (EIA) also impact WTI prices. If these reports show declining inventories, it can signal increased demand, lifting oil prices. Conversely, higher inventories might indicate an oversupply, which can drive prices down. Typically, the API shares its report on Tuesdays, with the EIA following on Wednesday. The EIA’s findings are generally seen as more reliable due to its status as a government agency.
OPEC, consisting of 12 oil-producing nations, meets biannually to set production quotas for member countries, influencing oil markets. Decisions to lower production can reduce supply, raising prices, while increased production usually has the opposite effect. OPEC+, which includes additional non-OPEC members like Russia, also plays a critical role in these dynamics.
