WTI drifts higher to near $64.00 on Russia-Ukraine supply concerns
- WTI price attracts some buyers near $63.95 in Monday’s early European session, adding 0.30% on the day.
- Rising Fed rate cut bets and persistent Russia-Ukraine tensions support the WTI price.
- Investors assess the impact of the heightened US tariffs on Indian goods.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $63.95 during the early European trading hours on Monday. The WTI recovers some lost ground as rising bets of a Federal Reserve (Fed) rate cut offset pressure from new US tariffs on Indian imports. Traders await the release of the American Petroleum Institute (API) weekly crude oil stock, which is due later on Tuesday.
Traders still ramp up their bets of a Fed rate reduction this month despite the hot US Personal Consumption Expenditures (PCE) Price Index report for July. Markets are now pricing in nearly an 89% possibility of a 25 basis points (bps) rate cut by the Fed at the September policy meeting, up from an 85% chance before the US PCE data, according to the CME FedWatch tool. Fed rate cut expectations might weigh on the US Dollar (USD) and underpin the USD-denominated commodity price.
Additionally, escalating tensions between Russia and Ukraine contribute to the WTI’s upside as the attacks reignited supply security concerns. Ukrainian drone strikes hit Russian energy sites, sparking a fire at the Kursk Nuclear Power Plant and damaging the Ust-Luga export terminal in the Baltic Sea. US President Donald Trump threatened to impose additional sanctions on Russia if no progress is made in peace talks with Ukraine.
On the other hand, Trump’s decision to impose steep tariffs on Indian imports took effect, raising fears of slowing trade and weaker global demand. This, in turn, might undermine the black gold in the near term. The Trump administration doubled tariffs on Indian imports to 50%, citing India’s refusal to stop buying Russian crude and defence hardware.
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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