- WTI price loses ground amid risk aversion ahead of President-elect Donald Trump’s inauguration on Monday.
- Traders shift their attention to how the incoming Trump administration will approach sanctions on Russia’s energy sector.
- Crude Oil prices struggle due to easing tensions in the Middle East, as Hamas and Israel exchanged hostages and prisoners.
West Texas Intermediate (WTI) extends losses for the third successive session, trading near $77.20 per barrel during Monday's Asian session. Oil traders adopt a cautious stance ahead of President-elect Donald Trump’s inauguration later in the day. The US market will remain closed on Monday in observance of Martin Luther King Jr. Day.
Concerns are mounting over Trump’s policy proposals, including potential tariffs, tax cuts, and the deportation of undocumented immigrants. Analysts note that the future path of US Federal Reserve (Fed) interest rates will depend significantly on how extensively these policies are enacted.
Oil prices rose following Washington’s imposition of two rounds of sanctions on Russia’s energy sector over the ongoing Ukraine conflict. Over the past two weeks, the Biden administration targeted more than 100 tankers and two Russian Oil producers.
Attention is now shifting to how the incoming Trump administration will approach the Biden administration’s sanctions. Traders are also looking for clarity on Trump’s stance regarding trade tariffs and potential sanctions on Iran and Venezuela.
However, easing tensions in the Middle East may cap further upside of crude Oil prices. On Sunday, Hamas and Israel exchanged hostages and prisoners, marking the first day of a ceasefire after 15 months of conflict.
Hamas released three female hostages in exchange for 90 Palestinians imprisoned in Israel, according to Bloomberg. In turn, for the three Israeli hostages freed, Hamas agreed to release 90 prisoners and detainees, all of whom were expected to be women and children, as reported by the Commission of Prisoners' Affairs.
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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