WTI Oil extends its pullback to $91.00 amid US imports of Russian Diesel
- WTI Oil eases to levels near $91.00 from two-week highs around $93.50 on Monday.
- Hopes of an increase in Russian diesel supplies are pushing Crude prices lower.
- Tensions in the Middle East remain high, which keeps Crude prices steady at relatively high levels.
Crude Oil trades lower on Tuesday, as investors ponder the impact of the US President, Donald Trump’s decision to lift the ban on Russian diesel imports. The US benchmark West Texas Intermediate (WTI) barrel has retreated to session lows at $91.05 during the European Trading session, about $2.5 below the two-week high, at the $93.50 area, hit on Monday.
Markets' expectations of a significant increase in diesel supplies from Russia entering global markets will push prices lower and offset the upside pressures stemming from the escalating Middle East conflict.
Doubts about the real impact of Russian diesel imports
Trump affirmed on Truth Social on Monday that the decision to ease restrictions on Russian diesel imports for six months “is the right choice for the American people”. A report by Goldman Sachs, however, casts doubt on the overall impact on oil prices from that decision, as it said the 6 million barrels per day expected to be delivered by Russia will only lower the price of the barrel by between $1 and $2,
Elsewhere, tensions in the Middle East are far from easing, which pressures Crude prices higher. The Saudi Arabian Security Minister, Prince Abdul Aziz bin Salman, called for a serious response to last weekend’s deadly attacks on Saudi Airports by Houthi militias, which threatens to escalate the US-Israel war in Iran into a regional conflict.
Analysts at ING point out that physical supply risks are not confined to geopolitical flashpoints, noting that “hurricane activity in the Gulf of Mexico continues to disrupt offshore operations for US producers.” They highlight that companies “have shut in almost 605k b/d of oil production, which is equivalent to nearly 30% of total US production in the Gulf of Mexico, according to the Marine Minerals Administration,” adding another layer of constraint to the near-term supply picture.
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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