WTI trades with a negative bias below mid-$66.00s; downside seems limited
- WTI struggles to capitalize on the previous day’s move higher to over a one-week top.
- Sustained USD buying is seen as a key factor acting as a headwind for the commodity.
- Trade optimism and Trump's warning of sweeping Russia sanctions support Oil prices.
West Texas Intermediate (WTI) US Crude Oil prices edged lower during the Asian session on Tuesday and eroded a part of the previous day's strong gains to over a one-week high. The commodity currently trades just below mid-$66.00s, down 0.40% for the day, though the downside seems cushioned.
A trade agreement between the US and European Union (EU) adds to the recent optimism over a US-Japan deal and eases investors' worst fears. Moreover, news of a possible extension of the US-China trade truce lifted hopes for an improvement in global economic activity and a pickup in fuel demand, which, in turn, might continue to act as a tailwind for Crude Oil prices.
Meanwhile, US President Donald Trump set a new deadline of 10 or 12 days for Russia to make progress towards ending the war in Ukraine. Trump warned of severe sanctions if Russia failed to act and said that his administration would impose 100% secondary tariffs on countries continuing to buy Russian exports. This could impact Russia’s oil flows and could also support the black liquid.
Bulls, however, might refrain from placing aggressive bets amid a broadly firmer US Dollar (USD), which tends to undermine demand for the USD-denominated commodity. Investors might also opt to wait for the outcome of a two-day FOMC policy meeting on Wednesday before positioning for a firm direction. This, in turn, backs the case for some near-term consolidation for Oil 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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