WTI Oil slides on Ukraine-Russia peace progress despite Fed cuts, inventory draw
- WTI prices decline, pressured by progress toward a potential peace agreement between Ukraine and Russia.
- The Federal Reserve continues its easing cycle, while US Crude Oil inventories decrease.
- Markets closely monitor diplomatic developments, now a key driver for Oil supply expectations.
West Texas Intermediate (WTI) US Oil trades around $57.70 on Thursday at the time of writing, down 1.80% on the day. The Crude Oil remains under pressure as signs of progress emerge in negotiations aimed at ending the conflict between Russia and Ukraine, a development that reduces the risk premium previously embedded in Oil prices.
US President Donald Trump reportedly told Ukrainian President Volodymyr Zelensky he has until Christmas to accept a proposal that could end the war, according to the Telegraph. Meanwhile, Zelensky confirmed he is finalizing a revised peace plan to present to Washington, signaling an acceleration of diplomatic efforts. Analysts note that a lasting de-escalation would reduce risks to regional energy infrastructure and improve supply visibility, prompting a bearish adjustment in WTI in the near term.
On the macroeconomic front, the Federal Reserve (Fed) cut interest rates again by 25 basis points on Wednesday, bringing the federal funds range down to 3.5%-3.75%. A more accommodative policy stance can support energy demand by stimulating economic activity, although the immediate impact remains limited in a market currently dominated by supply-side considerations.
Data from the Energy Information Administration (EIA) released Wednesday showed US Crude inventories fell by 1.812 million barrels for the week of December 5, exceeding expectations of a roughly 1.2-million-barrel decline. Although this larger-than-expected draw would normally support prices, it is overshadowed by geopolitical developments in Eastern Europe.
Meanwhile, analysts at ING highlight that the global Oil market continues to slide deeper into oversupply as Russian export volumes struggle to find buyers. The bank stresses that steeper discounts on Russian Crude or even a potential decline in Russian output may be necessary to rebalance the market.
For now, investor focus remains on the evolution of negotiations between Kyiv, Moscow, and Washington, which is the primary directional driver for WTI. Any confirmation of progress, or, conversely, signs of a setback, could fuel increased volatility in energy prices.
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.