West Texas Intermediate (WTI) crude oil prices have at least momentarily broken out to a one-week high, now trading just over the $59.40 per barrel level. Markets excitement expectations for a easing US-China trade war. Further agreement in this area has led to hopes of turning a corner in the US-China trade war. To that end, WTI has jumped more than 1% today. This impressive recovery from a close-to-one-month-low of near $55.00 provides welcome relief across the oil market.
Since then the market has exploded on optimism about near-term trade talks. Recent weekly oil inventory builds from the American Petroleum Institute (API) and the EIA have injected confidence as well. These reports oftentimes dictate the price movements of WTI. This week, though, traders are scrambling to gauge the wider supply picture, still reeling from the shockwaves of those reports.
Market Dynamics Influencing WTI
WTI is one of three primary types of crude oil, the other two being Brent and Dubai Crude. These commodities historically rally together in price. Results within 1% of each other. About 75% of the time, their results are within 1% from each other. This surprising correlation illustrates just how integrated the global oil market is. Geopolitical events, supply and demand concerns paired with economic indicators heavily impact pricing.
In recent weeks, WTI’s trading patterns have shown resilience amid persistent geopolitical risks, particularly stemming from the ongoing Russia-Ukraine war. Now, contributed conflicts across the Middle East have ramped up fears over supply. This unexpected development has definitely strengthened bullish sentiment in the crude oil market.
As traders come to terms with these dynamics, tighter US supplies have become a major tailwind for crude oil. Industry analysts caution that any indications of lower production levels might push prices up further. That’s what should make these upcoming monthly inventory reports so important to follow.
Cushing Hub’s Role in Distribution
West Texas Intermediate has its origins in the United States. It mostly travels through the Cushing hub, also called “The Pipeline Crossroads of the World.” This shrewd positioning gives them tremendous influence over the movement of crude oil across North America and overseas. This hub is a highly effective regional hub for pipeline logistics. Consequently, it not only aids in shielding WTI’s pricing from foreign manipulation (OPEC), it allows a timely adjustment to domestic market fluctuations.
Yet the Cushing hub—which is the main price-setting point for U.S. oil—doesn’t just help ship oil. It’s a major storage hub as well. Consequently, it can have a large impact on WTI prices as it reflects changes in inventory levels and demand. The market is particularly focused on Cushing’s storage levels because a draw can indicate tighter supplies and provide upward price support.
Optimism Surrounding US-China Trade Talks
US-China relations and global markets — Tensions between the US and China have roiled global markets for years. In recent weeks, that pessimism has given way to cautious optimism. Traders are watching the talks very nervously. They’d like to see concrete indications that would result in the removal of tariffs and other trade barriers. Any positive vibes about the outcome of these negotiations would go a long way toward alleviating demand worries for crude oil.
Many market analysts are convinced that a resolution will help stimulate rebound economic growth, thereby expanding the marketplace and creating greater demand for energy products. This prospect has spurred oil traders to take a more bullish view on WTI and other crude oil benchmarks.
“The Pipeline Crossroads of the World” – description of Cushing hub.