WTI drops to near $77.00 due to increased ceasefire optimism between Israel and Hamas
- WTI price extends its losing streak due to increased optimism surrounding ceasefire negotiations in the Middle East.
- Israeli Prime Minister Benjamin Netanyahu has suggested that a ceasefire agreement might be taking shape.
- API Weekly Crude Oil Stock fell by 3.9 million barrels for the previous week, against an expected 2.47 million-barrel decrease.
West Texas Intermediate (WTI) Oil price continues to decline for the fifth successive session, trading around $77.00 per barrel during the Asian hours on Wednesday. This decrease probably follows a surge of optimism surrounding potential ceasefire negotiations between Israel and Hamas.
Israeli Prime Minister Benjamin Netanyahu has hinted that a ceasefire agreement, which could lead to the release of several hostages in Gaza, might be in the works. Netanyahu is currently in Washington to address Congress, according to The Associated Press.
Egypt, Qatar, and the United States (US) are working to broker a phased deal between Israel and Hamas to halt the fighting and secure the release of remaining hostages. Meanwhile, in China, Palestinian factions Hamas and Fatah have signed a declaration to form a unity government and resolve their long-standing rift.
However, crude Oil prices found some support from declining US crude inventories. On Tuesday, the American Petroleum Institute (API) reported a drop of 3.9 million barrels in Weekly Crude Oil Stock for the week ending July 19, exceeding market expectations of a 2.47 million-barrel decrease. This follows a previous decline of 4.44 million barrels. The US Energy Information Administration’s (EIA) Crude Oil Stocks Change report, scheduled for Wednesday, is anticipated to show a 0.7 million-barrel increase for the same period.
The US Dollar (USD) faces challenges due to rising bets on a Federal Reserve (Fed) rate cut in September. According to CME Group’s FedWatch Tool, markets now indicate a 93.6% probability of a 25-basis point rate cut at the September Fed meeting, up from 88.5% a day earlier.
A weaker US Dollar could make oil cheaper for buyers using other currencies, potentially boosting demand for the commodity. Additionally, lower interest rates could stimulate economic activity in the United States, the world's largest Oil consumer, which may help support Oil prices.
Traders await the data release of the US Purchasing Managers Index (PMI) data on Wednesday and the Gross Domestic Product (GDP) Annualized (Q2) figures on Thursday. These figures are expected to provide new insights into the economic conditions of the United States.
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 13 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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