- WTI price weakens amid oversupply fears following potential Russia-Ukraine ceasefire talks.
- President Trump stated that Ukraine and Russia are preparing to begin immediate ceasefire negotiations, potentially without US involvement.
- The PBoC lowered both the one- and five-year Loan Prime Rates by 10 basis points, to 3.0% and 3.5%, respectively.
West Texas Intermediate (WTI) Oil price is trading around $62.00 per barrel during the early European session on Tuesday, retreating after two consecutive days of gains. The pullback comes as markets evaluate the possible effects of a Russia-Ukraine ceasefire on global Oil supply.
According to Reuters, US President Donald Trump announced on Monday that following a phone call with Russian President Vladimir Putin, Ukraine and Russia are set to begin immediate ceasefire talks—potentially without US involvement. Any relaxation of sanctions on Russia could lead to increased oil exports, adding to an already oversupplied global market.
Adding further pressure to Oil prices, Moody’s downgraded the US sovereign credit rating, clouding the economic outlook for the world's largest Oil consumer. In addition, weaker-than-expected industrial production and retail sales in China, currently the top Oil importer, have reinforced bearish sentiment.
At its May policy meeting, the People’s Bank of China (PBoC) lowered both the one-year loan prime rate and the five-year loan prime rate by 10 basis points, to 3.0% and 3.5%, respectively. The widely anticipated cuts, which brought both rates to record lows, are part of Beijing’s broader monetary easing strategy aimed at revitalizing a sluggish economy amid escalating trade tensions. These measures may offer some support to Oil demand in the longer term.
Meanwhile, geopolitical tensions remain elevated as Iran's Deputy Foreign Minister Majid Takhtravanchi warned that negotiations with the US would “lead nowhere” if Washington insists on a full halt to Tehran’s uranium enrichment.
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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