WTI climbs above $71.00 as Trump threatens Russia with oil tariffs
- WTI price jumps to around $71.35 in Tuesday’s Asian session.
- Trump warned of possible secondary tariffs on Russian oil buyers.
- A weakening economic outlook could dampen oil demand and cap the upside for the WTI price.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $71.35 during the early Asian session on Tuesday. The WTI price rises on supply worries after US President Donald Trump threatens Russia with oil tariffs.
Trump said on Sunday that he was "pissed off" at Russian President Vladimir Putin and would impose secondary tariffs of 25% to 50% on buyers of Russian oil if he feels Moscow is blocking his efforts to end the war in Ukraine. Trump also threatened Iran over the weekend with bombing and secondary tariffs if Tehran did not come to an agreement with Washington over its nuclear program.
"(Trump's) threat on secondary tariffs on Russian and Iranian oil is a factor oil market participants are tracking, although he has indicated he is not planning to introduce them for now," said UBS analyst Giovanni Staunovo. "But, there is a rising risk of larger supply risks down the road.”
On the other hand, concerns over a global economic downturn intensified ahead of Trump’s auto and reciprocal tariffs, which are set to take effect on Wednesday. Trump said late Monday that his reciprocal tariffs plan will target all other countries when it is unveiled Wednesday, adding more uncertainty to the much-anticipated trade policy just days before its implementation.
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.