WTI Crude’s reversal from $60.00 extends to levels near $59.00
- Oil prices retreat on Monday with investors looking at the progress of Ukrainian peace talks.
- The removal of the US ban on Russian Oil might increase global supply by up to 2 million barrels per day.
- Market hopes that the Fed will cut rates this week are keeping Oil downside attempts limited for now.
Oil prices are trading nearly $1 lower on the day on Monday, as the commodity’s reversal from Friday’s highs above $60.00 extends to session lows below $59.20 ahead of the American session opening times.
The price of the benchmark US West Texas Intermediate retreats on Monday, with investors monitoring the multilateral talks to end the conflict in Ukraine, which might ease US restrictions on Russian Oil, and bring more than 2 million barrels per day back to the market. Ukrainian president Volodymyr Zelenskiy is set to meet European leaders on Monday with US peace proposals in the background.
From a wider perspective, however, crude prices maintain their bullish tone from late November lows, near $57, intact. Market expectations that a Federal Reserve rate cut on Wednesday will boost US economic growth and support demand on the world’s largest oil consumer are keeping downside attempts limited.
Meanwhile, Reuters reported this weekend that the European Union and the G7 are in talks to replace the current cap on the price of Russian Oil import with a full ban on Western maritime services. This would make it more difficult for Russian crude to reach foreign markets, making it exclusively dependent on its shadow fleet, and therefore reducing global supply significantly, which is another source of support for crude prices.
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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