WTI retreats to near $68.00 on Chinese stimulus disappointment, stronger US Dollar

• WTI price drifts lower to near $68.00 in Tuesday’s early Asian session. 
• The stronger USD weighs on the USD-denominated Oil. 
• China's stimulus plan disappointed investors, dragging the WTI price lower. 

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $68.00 on Tuesday. The WTI price edges lower amid the fears that a Trump administration will spark a tariff-led trade war and concerns about demand growth in China. 

Donald Trump's US presidential election victory may continue to affect the WTI prices. Trump has announced his intention to impose a blanket tariff ranging from 10% to 20% on all imports and additional tariffs on up to 60% of products imported from China. A renewed trade war with China would also likely hurt economic growth in China, delaying any recovery in crude oil demand.

The firmer Greenback contributes to the WTI’s downside. Meanwhile, the US Dollar Index (DXY), a measure of the USD's value relative to a basket of foreign currencies, climbs to fresh four-month peaks around 105.70. This makes USD-denominated Oil prices more expensive. However, the profit-taking in the Greenback might cap the downside for the black gold for the time being. 

Beijing's latest stimulus package, which was announced on Friday, fell short of market expectations. Additionally, data released on the weekend showed that Chinese consumer prices rose at the slowest pace in four months in October while producer price deflation deepened, raising concerns about demand growth in the world's second-biggest oil consumer. 

WTI Oil FAQs

What is WTI Oil?

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.

What factors drive the price of WTI Oil?

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.

How does inventory data impact the price of WTI Oil

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.

How does OPEC influence the price of WTI Oil?

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.