WTI flattens around $66 even as EU approves sanctions on Russia

The Oil price trades broadly flat around $66.00 while EU has approved sanctions on Russian energy exports.
US tariff uncertainty has limited the upside in the Oil price.
US President Trump threatens to increase the baseline tariff rate for imports from the EU.

Sagar Dua FXStreet

West Texas Intermediate (WTI), futures on NYMEX, trades flat around $66.00 during the European trading session on Monday. The Oil price struggles for direction while the European Union (EU) has imposed sanctions on energy exports from Russia, following its three-year long war with Ukraine.

According to the EU sanctions imposed on Russia, the new price cap on Oil exports from Moscow will be around $47.60 per barrel, 15% below the current average traded price, as per report from the Times of India (TOI).

Technically, the impact should be positive on Oil price as sanctions on energy exports from Ruess should limit the flow of crude.

However, uncertainty surrounding trade negotiations between the United States (US) and its trading partners ahead of the August 1 deadline has limited the upside in the Oil price.

So far, the US has announced trade deals with the United Kingdom (UK), Vietnam, and Indonesia, and a limited pact with China. Washington has also expressed confidence that it is close to signing a trade agreement with India. The nation has imposed tariffs on 22 nations, notably Japan, Vietnam, Canada, Mexico, and the European Union (EU)

Meanwhile, trade tensions between the US and the EU have increased as President Donald Trump has been reluctant to reduce 25% automobile levy and is emphasizing to increase the baseline tariff rate from 10% to 15%-20%, according to a report from the Financial Times (FT).

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

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

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