- Oil appreciates for the fourth day in a row, reaching prices above $64.00.
- Hopes of lower interest rates in the US have boosted expectations about an increase in demand.
- US President Trump has flagged the possibility of further sanctions against Russia.
Crude Oil prices are trading higher for the fourth day in a row on Monday, testing prices above $64.00 level for the first time over the last two weeks, as market expectations of lower interest rates in the United States have raised hopes of higher demand.
The price of the US benchmark West Texas Intermediate appreciates 0.5% on Monday, trading at $64.05, nearly $3 above last week's lows at $61.40. Investors' hopes that lower interest rates in the US will support economic growth are buoying prices on Monday.
Last Friday, the Federal Reserve Chairman, Jerome Powell, surprised markets by highlighting the downside risks threatening the US labour market and acknowledged the need for a less restrictive rate policy, opening the doors for a rate cut in September.
Furthermore, US President Trump has given another ultimatum to Russia’s President, Vladimir Putin, threatening him with further sanctions if there’s no progress on a peace deal in Ukraine. Market concerns about further restrictions on Russian Oil exports are acting as an additional support for crude prices.
Russia has shown willingness to end the war with Ukraine, but the Kremlin has been pushing back Zelenskyy’s proposals for direct talks, while increasing its attacks on its western neighbour. In this context, the risk of further sanctions on Russian Oil and on countries importing it is looking increasingly likely.
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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