WTI holds steady above $65.00 due to US-EU trade agreement
- WTI price rises as US-EU trade deal boosts trade optimism.
- Market sentiment improves as the US and China are expected to extend their tariff truce by another 90 days.
- The Oil prices may struggle due to the potential for further easing supply curbs by OPEC+.
West Texas Intermediate (WTI) Oil price gains ground after registering more than 1.50% losses, trading around $65.10 per barrel during the Asian hours on Monday. Crude Oil prices receive support due to trade optimism, driven by the trade deal between the United States (US) and the European Union (EU).
The US and EU reached a framework trade agreement on Sunday that sets 15% tariffs on most European goods, taking effect on August 1. This deal has ended a months-long standoff, according to Bloomberg. European Commission President Ursula von der Leyen noted that the bloc agreed not to impose retaliatory tariffs and pledged $600 billion in investment in the US on top of existing expenditures.
Additionally, the market sentiment improves ahead of the US-China trade talks. US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng are scheduled to meet later in the day in Stockholm. The world’s two largest Oil consumers are expected to extend their tariff truce by another three months, according to a source cited by the South China Morning Post (SCMP) on Sunday. The US has reportedly frozen export controls on key technologies to China to maintain smoother trade relations, according to a source cited by the Financial Times. These developments have boosted optimism about a further easing of global trade tensions, potentially reinforcing expectations for increased crude demand.
However, the upside of the Oil prices could be limited due to the potential for further easing supply curbs by the Organization of the Petroleum Exporting Countries and their allies, known as OPEC+. Four OPEC+ delegates stated last week that it is unlikely the eight-member countries will alter their plan to increase oil output by 548,000 barrels per day in August, per Reuters.
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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