WTI struggles below $56.00 amid hopes for a Russia–Ukraine peace deal
- WTI remains under pressure as optimism over a Russia–Ukraine peace deal outweighs supply disruption concerns.
- US President Trump said Ukraine war talks are “getting close,” ahead of US–Russia talks this weekend.
- Traders remain unsure how Washington would enforce Trump’s pledge to block sanctioned tankers entering and leaving Venezuela.
West Texas Intermediate (WTI) Oil price loses ground for the second successive session, trading around $55.80 per barrel during the Asian hours on Friday. Crude Oil prices are on track for a second consecutive weekly decline as hopes for a Russia–Ukraine peace deal outweigh supply disruption concerns.
According to Reuters, US President Donald Trump said on Thursday that negotiations to end the war in Ukraine are “getting close to something,” ahead of a planned US meeting with Russian officials this weekend.
Meanwhile, traders remain uncertain about how Washington would enforce Trump’s pledge to block sanctioned tankers entering and leaving Venezuela, which accounts for about 1% of global Oil supply.
In an unprecedented step, the US Coast Guard seized a Venezuelan Oil tanker last week. On Thursday, Venezuela authorized two unsanctioned very large crude carriers to depart for China on Thursday, Reuters reported, citing sources familiar with the country’s oil export operations.
The US is also moving to tighten sanctions on Russia’s energy sector to support Ukraine peace efforts, while the UK has sanctioned three smaller Russian Oil producers. Additional measures targeting Russian Oil could pose a larger supply risk than Trump’s proposed blockade of Venezuelan tankers.
Oil prices, on December 16, fell to their lowest level in nearly five years, pressured by expectations of ample supply as OPEC+, the Organization of the Petroleum Exporting Countries and its allies, gradually restores shut-in capacity and non-OPEC producers raise output. Early signs of demand weakness are also emerging among major consumers, including China and the US, leaving oil prices down about 20% for the year.
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.
Author
Akhtar Faruqui
FXStreet
Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.
