WTI trades cautiously near two-month low of $68.60 on peace deal, tariff fears
- The Oil price sees more downside as investors remain hopeful for Russia-Ukraine peace.
- A global economic slowdown by Trump’s tariffs in an unfavorable scenario on the Oil price.
- Investors await the US EIA crude stock data, which will be published at 15:30 GMT.
West Texas Intermediate (WTI), futures on NYMEX, trades with caution around two-month low of $68.60 in European trading hours on Wednesday. The Oil price struggles to gain ground as the Oil demand outlook has weakened due to growing optimism over Russia-Ukraine peace and fears of United States (US) President Donald Trump’s tariff agenda.
The White House has said that President is aiming to end war in Ukraine as early as possible. President Trump is also expected to meet Russian leader Vladimir Putin sooner to discuss more about negotiation terms.
Meanwhile, the US and Ukraine have agreed to terms of a draft minerals deal that doesn’t have U.S. security guarantees or continued flow of weapons, Reuters reported on Tuesday. Market participants have considered the move as a positive step towards peace in Ukraine.
Positive developments in Russia-Ukraine peace would an unfavorable scenario for the Oil price, assuming that the US and Europe would lift sanctions on Russia if it calls off war in Ukraine that will lead to an increase in seaborne oil flows in the global market.
Fears of a global slowdown from Trump’s tariff agenda has also kept the Oil price on the backboot. Till now, Trump has announced 10% tariffs on imports from China and 25% on aluminum and steel imports. He is planning to announce reciprocal tariffs and 25% levies on foreign cars, pharmaceuticals and semiconductors by April.
In today’s session, investors will focus on the US Energy Information Administration (EIA) crude inventory data for the week ending February 21. The US EIA is expected to have seen an increase in oil stockpiles by 2.34 million barrels.
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.