WTI trades with caution around $64.00 as tariff deadline approaches
- The Oil price trades cautiously around 64.00 as investors turn cautious ahead of completion of 90-day tariff pause on July 9.
- An increase in Fed dovish bets is expected to provide some relief to the Oil price.
- This week, the Oil price plummeted after the Israel-Iran ceasefire.
West Texas Intermediate (WTI), futures on NYMEX, exhibit a sluggish performance slightly above the two-week low of $63.73 From Wednesday. The Oil price trades cautiously near its immediate lows on persistent global demand concerns due to the tariff policy announced by United States (US) President Donald Trump since his return to the White House.
The uncertainty surrounding the US tariff policy is expected to escalate further as the deadline of the 90-day pause on the imposition of reciprocal tariffs will end on July 9. Washington provided an almost three-month relief on the tariff policy to negotiate bilateral deals with its trading partners. However, the White House seems to have failed to capitalize on the tariff relief as it has closed only one deal with the United Kingdom (UK), with which its business is moderate.
The Oil price bleed at the start of the week after US President Trump announced a ceasefire between Israel and Iran, which dismissed fears of the closure of Strait of Hormuz, a passage for almost a quarter of global oil supply.
Meanwhile, traders increasing bets supporting interest rate cuts from the Federal Reserve (Fed) this year could provide some relief to the Oil price. Fed dovish bets have increased as Donald Trump is expected to announce Fed Chair Jerome Powell’s successor for not supporting interest rate cuts. Investors expect decisions from Trump’s contender would be biased towards his economic agenda.
Analysts at Societe Generale said, “The market is pricing in President Trump appointing someone who at least at first sight appears more sympathetic to his cause.”
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.