WTI holds losses near $66.50 ahead of US-China discussions, looming Fed decision
- WTI declines due to market caution ahead of the US-China trade talks on the second day.
- The Fed is expected to keep the benchmark interest rate unchanged in July.
- President Trump cut the deadline for Russia to reach Ukraine peace deal.
West Texas Intermediate (WTI) Oil price edges lower after registering more than 2.5% gains in the previous session, trading around $66.50 per barrel during the early European hours on Tuesday. Crude Oil prices face challenges as traders adopt caution ahead of the second-day United States (US)-China negotiations and Wednesday’s US Federal Reserve (Fed) interest rate decision.
The Fed is widely expected to keep the benchmark interest rate steady between 4.25% and 4.50% on Wednesday. The FOMC press conference will be observed for any signs that rate cuts may start in September. Market participants will likely observe the upcoming data this week, including the Q2 Personal Consumption Expenditures (PCE) inflation report and July’s Nonfarm Payrolls, for further insight into the health of the US economy.
However, Oil prices gained ground as global trade sentiment improved following the United States (US)-European Union (EU) deal. This trade agreement imposed a 15% import tariff on most EU goods, helped avert a full-scale trade war between the two major allies that would have rippled across nearly a third of global trade and dampened the global Oil demand.
Traders await further developments on US-China trade talks. The discussions are set to resume on Tuesday, following over five hours of negotiations between top economic officials from both nations in Stockholm on Monday. However, US President Donald Trump also highlighted on Monday that countries refusing to negotiate separate trade deals could face tariffs ranging from 15% to 20%, well above the 10% rate set in April.
Oil prices also drew support from concerns of tighter global Oil supplies after Trump shortened the deadline for Russia to reach Ukraine peace deal. On Monday, Trump stated that Russia now has about 10 to 12 days to agree to a ceasefire or face potential “secondary sanctions,” revising the 50-day timeline he had set earlier this month.
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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