WTI Oil eases below $97 amid hopes of higher supplies from Russia
- WTI dips 2.3% from one-month highs on Monday and reaches session lows below $97.00.
- Trump's waiver on sanctions on Russia has boosted expectations of an increase in global Oil supplies.
- Increasing attacks on vessels attempting to cross the Strait of Hormuz are keeping Oil dips limited so far.
Crude Oil trades moderately lower on Monday as market hopes that US President Donald Trump’s waiver on Russia’s sanctions will increase global crude supply have eased concerns about the stalled Middle East conflict. The US Benchmark West Texas Intermediate (WTI) Oil has dropped below $97.00, from one-month highs at $99.27 on Friday, but remains more than 8% up on the month so far, and nearly 40% above July’s lows.
Trump signed an executive order on Friday to waive sanctions on Russian Oil exports, as frictions with the Ukrainian President, Volodymyr Zelensky, grow. The initiative raised broad criticism in the US, even within close allies of the president, which prompted the US Secretary of State, Marco Rubio, to request more time to evaluate the Situation on Saturday.
Comments by the US President did not help to clarify the matter: "A lot of you don't know what my decision is yet, but we'll figure it out, and you'll figure it out," said the President to journalists in Florida this weekend.
Attacks in the Strait of Hormuz intensify
Meanwhile, the United Nations (UN) top maritime official affirmed that attacks on vessels trying to cross the Strait of Hormuz have intensified, amid reports of 24 ships being attacked over the last two weeks.
Iran’s Islamic Revolutionary Guard Corps (IRGC) affirmed earlier on Monday that an Oil tanker “violating regulations” caught fire after hitting a sea mine while attempting to cross the critical Hormuz waterway.
In this context, freight rates for supertankers have surged to record highs, and insurance companies have raised their fees, altogether boosting the price of the Oil barrel. This is likely to keep WTI declining significantly over the near term.
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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