27 Nov 2024

• WTI price rebounds to near $68.75 in Wednesday’s early Asian session. 
• US crude oil stocks fell by 5.935 million barrels last week, according to the API on Tuesday.
• The possible Middle East peace deal caps the WTI’s upside.

• West Texas Intermediate (WTI), the primary benchmark for crude oil prices in the United States, is currently trading at approximately $68.75 as of Wednesday. This price point reflects a slight uptick in the market, driven by ongoing uncertainties within the US oil sector and a notable, unexpected draw in crude oil inventories. In a significant development, US President-elect Donald Trump has announced intentions to impose a 25% tariff on all imports from Mexico and Canada. If these proposed blanket tariffs are enacted, they could introduce a layer of unpredictability to the outlook for the US oil industry. The potential economic ramifications of such tariffs are considerable, particularly for sectors closely tied to cross-border trade, including energy. Josh Zive, a senior principal at Bracewell LLP, shared insights with S&P Global Commodity Insights, stating, "These tariffs would undoubtedly create significant economic disruption if enacted. Initially, this may deter their implementation, as the energy sector would be one of the most adversely affected by such tariffs." His comments underscore the delicate balance policymakers must maintain when considering trade measures that could impact vital industries like oil and gas. Adding to the complexity of the market, a recent decline in US crude inventories has provided support for rising oil prices. According to the American Petroleum Institute (API) weekly report, crude oil stockpiles in the United States fell by 5.935 million barrels for the week ending November 22. This decline stands in stark contrast to the previous week, which saw an increase of 4.753 million barrels. Market analysts had anticipated only a modest rise of 250,000 barrels, making the actual draw a significant surprise that could bolster prices further. In addition to domestic factors, investors are also closely monitoring the evolving geopolitical landscape, particularly in the Middle East. On Tuesday, Israel approved a ceasefire agreement with Hezbollah militants in Lebanon, marking a potential end to nearly 14 months of conflict related to the Gaza Strip, as reported by AP News. This development could lead to a reduction in geopolitical tensions, which historically have had a direct impact on oil prices. Should stability return to the region, it may result in a decrease in WTI prices as market fears subside. Overall, the interplay of domestic economic policies, inventory levels, and geopolitical events will continue to shape the trajectory of WTI prices in the coming weeks, making it essential for investors and industry stakeholders to remain vigilant and responsive to these dynamic factors.