WTI loses ground below $59.00 amid Ukraine peace deal talks
- WTI price declines to $58.70 in Thursday’s Asian session.
- Traders will closely monitor the developments surrounding the Ukraine peace deal.
- The Federal Reserve lowered interest rates again at its December meeting on Wednesday.
- US crude inventories fell by 1.812 million barrels last week, said the EIA.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $58.70 during the Asian trading hours on Thursday. The WTI price drifts lower on diplomatic steps toward ending the Russia-Ukraine war. Traders will take more cues from the US weekly Initial Jobless Claims report later on Thursday.
US President Donald Trump told Ukrainian President Volodymyr Zelensky that he has until Christmas to accept his deal to end the war with Russia, per the Telegraph. Meanwhile, Zelensky said he is finalizing a revised peace proposal that he will deliver to the US soon, hinting at potential progress as Trump increases pressure on Kyiv to agree to a peace deal with Moscow.
Analysts believe that ending the Russia-Ukraine war would reduce threats to the region’s energy infrastructure and increase predictability on the supply side. This, in turn, could exert some selling pressure on the WTI price in the near term.
The Federal Reserve (Fed) announced its third consecutive interest rate cut this year, lowering the federal funds rate by 25 basis points (bps) to a range of 3.5%–3.75% on Wednesday. Lower rates can reduce consumer borrowing costs and boost economic growth and oil demand, supporting the black gold.
Data released by the Energy Information Administration (EIA) on Wednesday showed that crude oil stockpiles in the US for the week ending December 5 fell by 1.812 million barrels compared to an increase of 574,000 barrels in the previous week. The market consensus was for a decline of 1.2 million barrels in the reported period. A larger-than-expected draw in US crude oil stockpiles could lift the WTI price.
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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