WTI declines below $61.50 on cooling Middle East tensions

WTI price edges lower to near $61.20 in Friday’s early Asian session.
Israel and Hamas signed an agreement to cease fire in Gaza.
Stalled peace talks between Russia and Ukraine might cap the downside for the WTI.

Lallalit Srijandorn FXStreet

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $61.20 during the early Asian trading hours on Friday. The WTI loses traction amid easing geopolitical tensions in the Middle East. Traders will closely monitor how long the US federal government shutdown will last.

Bloomberg reported late Thursday that Israel has begun implementing a ceasefire deal in Gaza after it reached an agreement with Hamas for the release of all the hostages it holds. The ceasefire agreement calls for an end to hostilities in Gaza, Israel's partial withdrawal, and Hamas' release of hostages acquired during the war in return for hundreds of prisoners. Cooling tensions in the Middle East, the source of a third of the world’s crude, drag the WTI lower.

The US government shutdown entered its tenth day as US senators failed to pass spending proposals to reopen the federal government. US President Donald Trump said on Thursday that his administration plans to use the government shutdown to cut government programs popular with Democrats permanently. A prolonged shutdown could dampen the US economy and undermine oil demand.

On the other hand, the WTI price might receive support from concerns that the ongoing war in Ukraine could lead to additional sanctions on Russian energy exports, reducing global oil supplies. Investors believe stalled progress on a Ukraine peace deal as a sign that sanctions against Russia would continue for some time.

WTI Oil FAQs

What is WTI Oil?

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.

What factors drive the price of WTI Oil?

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.

How does inventory data impact the price of WTI Oil

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.

How does OPEC influence the price of WTI Oil?

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.

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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