West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $57.85 during the Asian trading hours on Monday. The WTI edges lower as the United States (US) pushes for a Russia-Ukraine peace deal. Traders await the release of the American Petroleum Institute (API) weekly crude oil stock report, which is due later on Tuesday.
Traders weigh the prospect of a Ukraine-Russia peace deal that could boost crude flows into an already well-supplied market. US Secretary of State Marco Rubio said that US President Donald Trump’s proposed November 27 deadline to secure Ukraine’s support could drift into next week.
If a peace agreement is reached and sanctions are lifted, additional supplies will be added to a market that is already projected to have a large surplus next year. This, in turn, could drag the WTI price lower in the near term.
On the other hand, growing expectations of a Federal Reserve (Fed) rate cut might help limit the WTI’s losses. Traders raised their bets of a reduction after the comments from New York Fed President John Williams. Williams stated on Friday that the Fed can still reduce the interest rates “in the near term” without putting its inflation goal at risk.
Lower interest rates generally weigh on the US Dollar (USD) and lift the WTI price, as it makes USD-denominated commodities cheaper for foreign buyers. Fed funds futures are now pricing in nearly a 74% odds of a 25 basis points (bps) rate cut at the Fed December meeting, up from the 40% chance that markets priced a week ago, according to the CME FedWatch tool.
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.
