The price of West Texas Intermediate (WTI) crude oil has been gaining traction for the second day in a row, hitting $66.40 during European trading hours this Wednesday. However, those gains are under pressure as concerns mount about a potential economic slowdown in the U.S., which might dampen demand. The looming impact of tariffs on global growth is also putting a cap on further increases.
That said, the weaker U.S. dollar provided some buoyancy for oil prices. Investors in oil markets are on edge due to growing fears of an economic downturn in the United States. President Donald Trump described the current economic state as a “transition period,” a phrase that has been taken as a hint of possible instability.
In an unsettling trend, U.S. stock prices continued their decline on Tuesday, marking the largest selloff witnessed in several months. This dip points to investor anxiety fueled by increased import tariffs and decreasing consumer confidence. Uncertainty about future tariff decisions, along with enduring concerns over the U.S. economy, means those in the oil market are acting with caution.
Meanwhile, late on Tuesday, a spokesperson for the Houthi movement announced plans to target Israeli vessels in the Red and Arabian Seas, the Bab al-Mandab Strait, and the Gulf of Aden, implementing these actions with immediate effect.
Turning stateside, the latest report from the American Petroleum Institute (API) revealed that U.S. crude oil stockpiles rose significantly by 4.247 million barrels for the week ending February 28, after a previous decline of 1.455 million barrels the week before. The expected increase had been pegged at around 2.1 million barrels.
Additionally, the United States joined other organizations in adjusting oil market forecasts. The International Energy Agency (IEA) has reduced its prediction for the 2025 oil surplus and drastically cut its glut forecast for the next year, attributing these changes to expected decreases in oil production from Iran and Venezuela. In line with these adjustments, the Energy Information Administration (EIA) predicts a reduction in global oil inventories by the second quarter of 2025.
For those who deal with commodities, especially WTI oil, here’s a quick rundown to keep you in the loop: West Texas Intermediate (WTI) is a type of crude oil traded on global markets. It’s one of the three major types of crude, along with Brent and Dubai Crude. Known for its low gravity and sulfur content, WTI is termed “light” and “sweet,” making it a high-quality oil that’s easy to refine. Originating in the United States and distributed through the Cushing hub, known as “The Pipeline Crossroads of the World,” WTI is a significant benchmark in the oil market, with its price frequently cited in the media.
WTI oil prices, like any other asset, hinge on supply and demand. Global economic health can boost or reduce demand accordingly. Political unrest, warfare, and sanctions can disrupt supply and, consequently, affect prices. OPEC’s decisions, made by this group of major oil-producing nations, play a crucial role too. Being traded in U.S. Dollars, the price of WTI can also fluctuate with changes in the currency’s value: a weaker dollar typically makes oil cheaper.
Oil inventory reports from the American Petroleum Institute (API) and the Energy Information Agency (EIA) also sway WTI prices, reflecting supply and demand variances. A decline in inventories might suggest rising demand, nudging prices higher. Conversely, larger inventories could indicate increased supply, which may push prices down. Typically released every Tuesday by the API and followed by the EIA on Wednesday, these reports usually present similar data, consistent approximately 75% of the time. Since the EIA is a government agency, its data is often considered more accurate.
OPEC, short for the Organization of the Petroleum Exporting Countries, is composed of 12 oil-producing nations that decide on production quotas biannually. These decisions frequently influence WTI prices. Limiting production can tighten supply, raising prices, while increasing output usually has the opposite impact. OPEC+ refers to this group with an additional ten non-OPEC countries, including Russia, known for its substantial oil output.
