WTI trades lower around $66.00, downside appears further due to easing supply concerns

WTI price struggled as supply concerns eased following the Israel-Iran ceasefire.
President Trump said that a ceasefire came into effect and urged both countries to uphold it.
Oil prices may receive support as Fed officials indicate an interest rate cut as early as July.

West Texas Intermediate (WTI) Oil price extends its losses for the second successive day, trading around $66.30 during the European hours on Tuesday. Crude Oil prices lose ground due to easing concerns over supply disruptions, driven by the ceasefire agreement between Israel and Iran.

On Tuesday, the Israeli government confirmed it had agreed to a ceasefire with Iran. Prime Minister Benjamin Netanyahu said that Israel achieved Iran war goals, adding that the country will respond forcefully to a breach of the truce. Iranian state media announced that Tehran had also accepted the deal, raising hopes for an end to the 12-day conflict.

However, the Israeli military warned that Iran had launched missiles toward Israel after the ceasefire took effect. US President Donald Trump said a ceasefire was now in place and asked both countries not to violate it.

Oil prices struggled as traders avoided panicking following Iran’s retaliatory strike on Al Udeid, a US military base in Qatar, on Monday. Qatar officials said that the missile barrage was intercepted and reported no casualties, as the base had been evacuated in advance. Concerns over Oil supply disruption ease as Tehran decided to avoid targeting the strategic Strait of Hormuz, a crucial chokepoint that handles approximately 20% of the world’s Oil transit.

Crude Oil prices may regain their ground due to dovish remarks from the Federal Reserve’s (Fed) officials pertaining to the policy outlook. Federal Reserve’s (Fed) Vice Chair for Supervision Michelle Bowman said on Monday that he could support a rate cut in July as risks to the job market may be on the rise. Moreover, Fed Governor Christopher Waller noted on Friday that the US central bank could start easing monetary policy as soon as next month. This is important to note that lower borrowing costs could boost economic activities in the United States (US), the world’s largest oil-consuming country, which may increase the demand and prices of crude Oil.

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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