The price of West Texas Intermediate (WTI) crude oil has not budged. They’re now hovering just below the mid-$59.00s thanks to concerns of an unfolding trade war between the United States and Europe and lessening concerns over Iranian supply outages. Right now, though, WTI is having a tough time making the most of the minor bounce it had yesterday. Today it is still mired in the mid-$58.00s, a level it just touched as a second consecutive one-week low.
Price traders are watching the factors at play pushing and pulling on WTI prices and the dynamics creating a perfect storm of market forces continue to collide. Geopolitical tensions, including with Iran and Europe’s trade relations, have a huge impact on market sentiment. Former US President Donald Trump just made a move away from interventionism threats on Iran. This positive development has contributed to a much more stable outlook for oil supply from one of the world’s leading producers, which helps support WTI prices.
Key Influences on WTI Pricing
WTI is one of three main types or benchmarks for crude oil, together with Brent and Dubai Crude. The data comes from the United States. It is then shipped via the Cushing hub, which earned that title “The Pipeline Crossroads of the World.” This unique geographic centralization enables cheaper transportation and trading of oil, which continues to drive its price.
WTI oil pricing is very susceptible to weekly inventory reports issued by the American Petroleum Institute (API) and the Energy Information Agency (EIA). These reports are extremely important in steering the course of market activity. These periodic reports are the only source of critical insights into supply levels and can have an enormous impact on trader sentiment. Market participants, including aggressive speculators, are now anticipating these reports to predict the direction of price movement in the coming weeks or months.
WTI prices have had a hard time catching a bid, especially with economic signals being a bit of a mixed bag. The safe-haven US dollar got back on the front foot, reversing yesterday’s pullback from nearly three-week highs (12/9). A stronger, more stable dollar gives WTI prices less upward potential. As the dollar strengthens, that means commodities priced in dollars are getting more expensive for foreign buyers.
Geopolitical Tensions Impact Market Sentiment
The third and likely most important aspect impacting WTI prices these days is the geopolitical scene. President Trump took a great step in this direction just recently by ratcheting down threats of military intervention with Iran. This decision has quelled fears of potential disruptions to oil supply from this key producer. This development has propped up WTI prices. In this post, we discuss how traders are now responding to what could be a more stable supply picture.
This is not the only area where trade-related tensions are heating up. President Trump recently threatened to raise tariffs on all goods from eight European countries. He’s going to need these measures, as he dreams of annexing Greenland. This unilateral action has drawn fierce retaliation from European Union heavyweights, including threats that have been decried as “blackmail.”
“Major European Union states condemned the tariff threats over Greenland as blackmail.”
Should these tariffs go into effect, they could be the opening shot of a new trade war. This would further eat away at demand for WTI and feel the market maelstrom even more.
Economic Indicators and Future Outlook
Market participants aren’t just looking to the conflicted statements from OPEC producers, they’re focused on economic indicators in the near-term that will impact WTI pricing. The fourth and final US Q3 GDP report will illuminate just how big the downturn is. At the same time, the US Personal Consumption Expenditure (PCE) Price Index will provide more detail on consumer spending. These indicators will likely shape expectations regarding the Federal Reserve’s rate-cut path and impact demand for the US dollar, indirectly affecting WTI prices.
Traders are understandably on edge as they gauge just how all these moving pieces will work together in the next few weeks. Different crude oil price benchmarks usually track closely together. In fact, they are only different than each other by 1% or less about 75% of the time. Yet, this pattern highlights just how tightly knit global oil markets really are. A move in one locality can cause huge ripple impacts through others.