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28 Jan 2025

WTI remains on the defensive near $73.00 amid US tariff concerns

  • WTI price edges lower to around $73.00 in Tuesday’s early Asian session.
  • Trump tariff threats and concerns over energy demand drag the WTI price lower. 
  • The Fed rate decision will be the highlight later on Wednesday. 

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $73.00 on Tuesday. The WTI price remains on the defensive amid the uncertainty surrounding US President Donald Trump’s tariff plans and weak economic data from China. 

Trump rattled markets by imposing tariffs on Colombia over the weekend before halting the action when the country agreed to his terms. He has also threatened actions against China, Canada, Mexico, and the European Union. In addition, Trump said that he would push Saudi Arabia and OPEC to lower oil prices. Uncertainty over how Trump's proposed tariffs and energy policies could undermine the WTI price in the near term. 

“Crude prices were volatile and came under pressure as the market reacted to the latest developments in U.S. trade policy. Although the tariffs the Trump administration threatened to apply on Colombia were short-lived, similar trade actions could cause ripples across global markets,” noted Analyst David Eng. 

Furthermore, Chinese startup DeepSeek surpassed ChatGPT as the most popular free app on Apple's App Store in the United States. This low-cost artificial intelligence (AI) model prompted concerns over energy demand to power data centers.

The US Federal Reserve (Fed) interest rate decision on Wednesday will be in the spotlight. The US central bank is expected to keep interest rates on hold at its January meeting amid broad uncertainty. Oil traders will closely monitor the Press Conference for guidance about the Fed's outlook. A hawkish stance of the Fed could weigh on economic growth and WTI demand expectations. On the other hand, dovish approach could provide some support to the black gold. 

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.

 

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