- WTI price loses ground due to ongoing discussions about a US ceasefire plan to end the Gaza war.
- Oil prices may appreciate as Tropical Storm Beryl could disrupt US energy supplies.
- Rising bets on Fed rate cuts could provide support for the Oil demand.
West Texas Intermediate (WTI) Oil price extends its losses, trading around $82.00 per barrel during the European session on Monday. This decrease is attributed to easing geopolitical tensions in the Middle East, particularly with the prospects of a ceasefire in Gaza. This development has alleviated concerns over supply disruptions. According to Reuters, discussions about a US ceasefire plan to end the nine-month-old conflict in Gaza are ongoing, with Qatar and Egypt mediating the negotiations.
The decline in Oil prices might be halted due to potential disruptions to US energy supplies from Tropical Storm Beryl. On Sunday, the ports of Corpus Christi, Houston, Galveston, Freeport, and Texas City were closed in preparation for Hurricane Beryl. The storm is expected to make landfall along the middle of the Texas coast between Galveston and Corpus Christi later on Monday, according to Reuters.
On Friday, weaker-than-expected US employment data increased the probability of Federal Reserve’s (Fed) interest rate cuts sooner rather than later. Lower Fed rates could help in growing the business conditions in the largest Oil consumer United States (US), which may support the demand for crude Oil.
US Nonfarm Payrolls (NFP) increased by 206,000 in June, following a rise of 218,000 in May. This figure surpassed the market expectation of 190,000. The US Unemployment Rate edged up to 4.1% in June from 4.0% in May. Meanwhile, Average Hourly Earnings decreased to 3.9% year-over-year in June from the previous reading of 4.1%, aligning with market expectations.
According to the CME's FedWatch Tool, rate markets are currently pricing in a 70.7% probability of a rate cut in September, up from 64.1% just a week earlier. The Greenback faced challenges as the Fed Chair Jerome Powell said last week that the central bank is getting back on the disinflationary path, 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 13 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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