WTI jumps to near $63 as EU plans to block Russian Oil imports
- WTI climbs to near $63.00 as the EU is planning to accelerate phasing out Russian energy imports.
- Russia has been selling Oil at lower prices amid sanctions imposed by various nations in the wake of the Moscow-Kyiv war.
- The Fed is certain to cut interest rates in its policy meeting next week.
West Texas Intermediate (WTI), futures on NYMEX, trades 1.6% higher to near $63.00 during the late European trading session on Friday. The Oil price strengthens due to multiple tailwinds, such as the European Union’s (EU) plans to avoid dependence on Russian energy products, and firm expectations that the Federal Reserve (Fed) will resume its monetary-easing campaign next week.
Earlier in the day, United States (US) Energy Secretary Chris Wright stated that the EU is planning to accelerate its process to phase out energy imports from Moscow in the wake of a three-year-long war between Russia and Ukraine.
Such a scenario is favorable for the Oil price as the old continent will cater to its energy demand through other Oil-exporting players, which don’t have any sanctions by Western leaders. Russia has been selling Oil at discounted prices compared to what OPEC+ players are offering amid the imposition of sanctions by the US, EU, and other nations.
Meanwhile, upbeat market speculation that the Fed will cut interest rates in the monetary policy announcement on Wednesday has also increased the appeal of the Oil price. Lower interest rates by the Fed bode well for the demand outlook of the Oil price.
According to the CME FedWatch tool, traders see a 7.5% chance that the Fed will cut interest rates by 50 basis points (bps) to 3.75%-4.00% on September 17, while the rest point a standard 25-bps interest rate reduction.
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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