WTI edges lower to near $58.50 on Ukraine peace hopes
- WTI price declines to $58.65 in Tuesday’s Asian session.
- Prospects for a Ukraine peace deal undermine the WTI price.
- Growing expectations of a Fed rate cut might cap the downside for oil prices.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $58.65 during the Asian trading hours on Tuesday. The WTI loses ground as the United States (US) pushes for a peace plan between Ukraine and Russia to end the three-year war. Oil traders brace for the release of the American Petroleum Institute (API) weekly crude oil stock report, which is due later on Tuesday.
The US peace proposal to end the Russia-Ukraine war weighs on the WTI price. Ukraine's President Volodymyr Zelenskiy stated on Monday that negotiations had reached a "critical moment," indicating that debates about territory and sovereignty would be challenging.
“We should expect a nervous oil market ahead of Thanksgiving on Thursday,” said Arne Lohmann Rasmussen, chief analyst at A/S Global Risk Management. “Several factors point to a peace agreement or possibly a ceasefire moving closer over the weekend, which supports further price declines this week.”
On the other hand, rising bets of a US interest rate cut in December might help limit the WTI’s losses. US Federal Reserve (Fed) Governor Christopher Waller said on Monday that available data indicate that the labor market remains weak enough to warrant another quarter-point cut.
The probability of a Fed rate cut next month surge to 80% on Tuesday after falling to 30% in the previous week, according to the CME FedWatch Tool. 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.
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.