WTI rises to near $59 as Ukraine attacks Russian energy facilities
- WTI gains to near $59.00 as Ukraine hits Russian oil facilities.
- Peace talks between the US and Russia to end the war in Ukraine failed to get a breakthrough.
- The Fed is expected to cut interest rates next week.
West Texas Intermediate (WTI) futures on NYMEX trade 0.25% higher to near 59.00 during the Asian trading session on Thursday. The Oil price gains as Ukraine’s attack on the Druzhba oil pipeline, situated in Russia’s central Tambov region that supplies energy products to Hungary and Slovakia, has raised supply concerns at times when Moscow’s major oil companies Rosneft and Lukoil are already facing the burden of sanctions.
Though the Oil price trades higher during Asian trading hours, it is still inside Wednesday’s trading range.
The Oil price rose on Wednesday as well after peace talks between top envoys of the United States (US) and Russia failed to make a breakthrough.
Trump said that special envoy Steve Witkoff and his son-in-law Jared Kushner had a “very good meeting” on Tuesday with Russian President Vladimir Putin. The Kremlin said Putin accepted some US proposals, although the meetings did not yield a breakthrough, CNN reported.
Going forward, the major trigger for the Oil price will be the monetary policy announcement by the Federal Reserve (Fed) next week, in which the US central bank is expected to cut interest rates by 25 basis points (bps) to 3.50%-3.75%.
According to the CME FedWatch tool, the probability of the Fed cutting interest rates by 25 basis points (bps) to 3.50%-3.75% in the December policy meeting is 89%.
This will be the third interest rate cut by the Fed in a row. Lower interest rates by the Fed bode well for the Oil demand outlook.
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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