WTI dips below $66.00 as Trump gives a deadline on sanctions to Russia
- Crude prices drop about $3 as Trump gives a deadline to Russia to end the war in Ukraine.
- The solid economic growth in China and its higher demand for Oil are keeping prices above June lows.
- OPEC+ is considering pausing supply hikes from October.
Crude Oil Prices reverted to previous gains on Monday, and dropped to session lows at $65.40 on Tuesday’s early trading, as Trump gave a 50-day deadline to apply further sanctions to Russia, which eased market concerns about supply.
The price of the US benchmark West Texas Intermediate reached three-week highs at $68.50 during Monday’s European session as the market awaited a “major statement on Russia”, anticipated by the US President on Friday.
Upbeat data from China eases fears of a decline in demand
On the other hand, the stronger-than-expected Gross Domestic Product and Industrial Production figures seen in China have calmed investors’ fears about a decline in demand from the world’s major Oil importer.
Recent data revealed that China ramped up crude purchases by 7.4% on the year in May, to 12.14 million barrels, the highest level in almost two years. These data, coupled with OPEC projections of an increase in demand in the third quarter of the year, are keeping Oil prices from retrearing further.
Apart from that, market sources suggest that OPEC+ countries might be nearing the end of their supply hikes and that the world’s major Oil producers might be considering a pause in October. This is also another source of support for Crude prices.
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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