WTI trades above $62.50 due to potential for additional sanctions on Russian Oil
- WTI prices advance amid rising prospects of further sanctions on Russian crude.
- Russia carried out its largest airstrike of the war on Ukraine, igniting the main government building in central Kyiv.
- Eight OPEC+ members will increase production by 137,000 barrels per day starting in October.
West Texas Intermediate (WTI) Oil price gains ground after three days of losses, trading around $62.70 during the early European hours on Monday. Crude Oil prices climb over 1.5% as prospects of additional sanctions on Russian crude grow following an overnight strike on Ukraine, reducing the likelihood of Russian Oil flooding the market.
Russia launched its largest air attack of the war on Ukraine, setting the main government building on fire in central Kyiv and killing at least four people, Ukrainian officials said on Sunday. US President Donald Trump said that European leaders would visit the United States (US) on Monday or Tuesday to discuss how to resolve the Russia-Ukraine war. Trump added that he was "not happy" about the status of the Russia-Ukraine war, after reporters asked about the attack, per Reuters.
Additionally, Oil prices gain ground after OPEC+, the Organization of the Petroleum Exporting Countries and its allies, decided to raise output further but at a modest pace amid weak demand prospects. Eight members of the group will raise production from October by 137,000 barrels per day (bpd), lower than the monthly increases of about 555,000 bpd for September and August and 411,000 bpd in July and June.
The prices of black gold also draw support from rising odds of the US Federal Reserve (Fed) rate cut, following weaker-than-expected jobs data for August. The CME FedWatch tool indicates a pricing in 92% of a 25-basis-point (bps) rate cut by the Fed at the September policy meeting, up from 86% a week ago, with bets rising on a potential 50 bps reduction this month. Lower borrowing costs could improve the economic activities in the United States, the world’s largest Oil consumer, and support the demand for 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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