WTI recovers after multi-month low, geopolitical easing, Fed rate cut hopes lift Oil
- The WTI US Oil recovers after hitting a low of $56.15, supported by a modest return of risk appetite.
- The planned meeting between Donald Trump and Vladimir Putin in Budapest raises hopes of an end to the war in Ukraine.
- The sharp rise in US Crude Oil inventories and expectations of a Federal Reserve rate cut may limit further gains.
West Texas Intermediate (WTI) US Oil rebounds on Friday to around $57.00 after reaching a new low since May earlier in the day at $56.15. The market is attempting to stabilize after a volatile week marked by mixed signals between geopolitical easing and supply excess.
The announcement of a future summit between US President Donald Trump and Russian President Vladimir Putin in Hungary has boosted expectations of an easing in the Russia–Ukraine conflict. A possible de-escalation could reduce risks to global energy flows, which in turn weighs on Oil prices.
“Concerns about tighter supplies eased after it was announced that Trump would be meeting with Putin to discuss ending the war in Ukraine,” noted Daniel Hynes, analyst at ANZ.
On the fundamental side, data from the US Energy Information Administration (EIA) on Thursday reinforced the short-term bearish tone. Crude Oil inventories in the United States rose by 3.524 million barrels in the previous week, far exceeding the 120,000-barrel forecast. This marks the third consecutive weekly build, reflecting resilient production and weaker refinery demand. According to ING, total Crude Oil stocks now stand at 423.8 million barrels, the highest since early September.
However, the impact of these figures is partly offset by growing expectations of another monetary easing move by the Federal Reserve (Fed). Markets are currently pricing in a nearly 98% chance of a 25-basis-point rate cut at the October meeting, followed by another reduction in December. A more accommodative Fed policy would likely weaken the US Dollar (USD) and support the USD-denominated Oil prices.
Meanwhile, Commerzbank believes that the International Energy Agency (IEA) overestimates the risk of a massive 4-million-barrel-per-day surplus expected next year. According to analyst Carsten Fritsch, the IEA’s assumptions about non-OPEC+ production are “too ambitious,” suggesting that the additional supply could be more limited, which helps to contain downward pressure on Oil prices in the medium term.
Thus, while WTI US Oil remains lower for the week, a combination of potential geopolitical easing and expectations of US monetary stimulus helps stabilize prices around $57.00 on Friday.
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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