West Texas Intermediate (WTI), the benchmark for US crude oil, saw a modest uptick in price on Wednesday, trading around $68.75. This increase comes amid ongoing uncertainty surrounding the US oil industry and a surprising drop in crude oil inventories.
In a move that has raised concerns over the future of the energy sector, US President-elect Donald Trump proposed a 25% tariff on all imports from Mexico and Canada, which could have significant implications for the oil industry. If implemented, these blanket tariffs could disrupt trade relations and create an unpredictable market environment for US oil producers.
“These tariffs would clearly have an economically disruptive impact, particularly on the energy sector,” said Josh Zive, senior principal at Bracewell LLP, in an interview. Zive noted that the energy sector would likely bear the brunt of such tariffs, which could ultimately influence the decision to impose them.
Meanwhile, a significant reduction in US crude stockpiles may also be contributing to the rise in oil prices. According to the American Petroleum Institute’s (API) weekly report, crude oil inventories for the week ending November 22 dropped by 5.935 million barrels. This marks a sharp contrast to the previous week’s increase of 4.753 million barrels, and it surpassed market expectations, which had predicted a much smaller rise of just 250,000 barrels.
In addition to domestic factors, investors are keeping a close eye on the evolving geopolitical landscape, particularly in the Middle East. On Tuesday, Israel reached a ceasefire agreement with Hezbollah militants, ending nearly 14 months of fighting that had been linked to the ongoing war in Gaza. While the easing of tensions could provide some stability to the region, it may also contribute to a potential decline in oil prices as geopolitical risks ease.
As developments unfold both in the US and abroad, market watchers will continue to monitor these key factors to gauge the future trajectory of WTI prices.
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