WTI slumps to near $56.50 as Trump and Putin summit looms
- WTI price tumbles to near $56.50 in Friday’s early European session.
- Trump and Putin agreed to meet in Hungary to discuss ending the war in Ukraine.
- US crude inventories rose by 3.524 million barrels last week, the EIA said.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $56.50 during the early European trading hours on Friday. The WTI remains on the defensive amid uncertainty over global energy supplies and a bigger-than-forecast crude inventory build.
US President Donald Trump said that he and Russian President Vladimir Putin agreed to meet in Budapest, Hungary, to discuss how to end Russia’s war in Ukraine, CNBC reported late Thursday. The call came a day before Ukrainian President Volodymyr Zelenskyy is set to meet with Trump at the White House, as Kyiv seeks more US support in its war against Russia.
The potential of peace talks between Trump and Putin signals a potential de-escalation of the Russia–Ukraine conflict, which drags the WTI price lower. "Concerns of tighter supplies were eased after it was announced that Trump would be meeting with Putin to discuss ending the war in Ukraine," said Daniel Hynes, an analyst at ANZ.
A larger-than-expected build in US crude oil inventories also weighs on the black gold. Data released by the US Energy Information Administration (EIA) on Thursday showed that crude oil stockpiles in the US for the week ending October 10 climbed by 3.524 million barrels compared to a rise of 3.715 million barrels in the previous week. Analysts estimated that stocks would increase by 120,000 barrels.
Nonetheless, the expectation that the US Federal Reserve (Fed) will deliver another quarter-point rate cut later this month could help limit the WTI’s price losses. Traders are now pricing in nearly a 98% probability of a 25 basis points (bps) rate reduction in October, followed by another easing in December, which is fully priced in, according to Reuters. A Fed rate cut bet generally weakens the US Dollar (USD) and supports the USD-denominated commodity price as a softer USD makes crude cheaper for foreign buyers.
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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