West Texas Intermediate (WTI) crude oil saw very scant losses on Monday, trading in the roughly $62.65 area. Intraday sellers have entered the market, resulting in price drops. WTI does not exhibit a very strong bearish conviction and continues to hover around a well-established trading range. This instability is indicative of the general uncertainty that is currently plaguing the oil market.
WTI is one of the three main global crude oil benchmarks, together with Brent and Dubai Crude. In the past, WTI prices have closely tracked those of Brent and Dubai Crude. Or put another way, even when they don’t match exactly, they’re usually (75% of the time) within 1% of each other. Since WTI is landlocked to the U.S, it is more responsive to market dynamics in North America. Second, it over-responds to geopolitical events.
Needless to say, WTI crude is down 0.50% so far today. Nonetheless, its present standing wields enough clout that it recently stopped its own recovery from a multi-year low reached earlier this month. That ongoing geopolitical risk premium is very much alive. This has all been greatly complicated by the ongoing Russia-Ukraine war, which still haunts the oil market.
Market Dynamics Influencing WTI
WTI’s price is driven by regional factors. It’s responsive to weekly oil inventory reports from groups such as the American Petroleum Institute (API) and the Energy Information Administration (EIA). These reports are key for understanding how supply and demand are dynamic, can play a role in shifting trader sentiment and ultimately driving price action.
Despite North Korea’s recent saber rattling and U.S. Secretary of State Tillerson’s inflammatory statements, these developments have had no impact—immediate or longer term—on WTI prices. Still, they contribute to this overall market uncertainty. “US Treasury Secretary Scott Bessent said on Sunday that he did not know if US President Donald Trump had talked to Chinese President Xi Jinping,” highlighting the unpredictability in geopolitical relations that can affect economic stability.
WTI usually carries qualities that are referred to as “light” and “sweet,” which is why it is popular amongst refiners. These qualities are paramount in deciding its attractiveness in international markets.
Price Range and Future Outlook
The last week has seen WTI hover in a tight range, unable to find the impetus to move further. The absence of any bearish conviction is a testament to the selling pressure. Without a major change in something like gas prices or the cost to build, meaningful downward pressure isn’t possible.
Market participants have been scrambling to re position themselves with geopolitical tensions escalating. The new trend It’s anyone’s guess as to how these factors will shape the market in the weeks ahead. Analysts expect that without major developments in the Russia-Ukraine conflict or U.S.-China tensions WTI prices will continue to stay stable. They continue to watch all of these developments to see how they would affect them.
The Cushing hub, known as “The Pipeline Crossroads of the World,” plays a critical role in distributing WTI across North America. Thus, any disruptions at this important logistics choke point could have drastic impacts on pricing and availability.