The price of Western Texas Intermediate (WTI) crude oil edged higher to $78.95 on Thursday following a surprise draw in US crude stocks. The Energy Information Administration (EIA) reported a decline of 1.4 million barrels in crude inventories for the week ending May 3, signaling an increase in demand. This news provided support for WTI prices, which had been under pressure in recent trading sessions.
The hopes of a ceasefire in Gaza have had an impact on WTI prices in recent days. The United States is actively working towards closing the gap between Israel and Hamas, with CIA Director William Burns visiting Israel to discuss the situation. While discussions of a ceasefire are positive for stability in the region, they may weigh on WTI prices as geopolitical tensions ease.
Impact of Federal Reserve Policy on WTI Prices
Hawkish remarks from Federal Reserve officials regarding interest rates have also influenced WTI prices. The Fed’s commitment to maintaining higher rates for longer periods of time has boosted the value of the US dollar, which in turn may limit the upside of USD-denominated oil. Boston Fed President Susan Collins’s statement about the extended timeline for addressing inflation adds to the uncertainty surrounding future monetary policy decisions.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, are set to meet on June 1 to discuss production policy. While there have been discussions about increasing oil supply, Russian Deputy Prime Minister Alexander Novak recently stated that there are currently no plans to do so within OPEC+. This meeting will be closely watched by market participants for any updates on production levels and their impact on WTI prices.
The combination of positive developments such as the drawdown in US crude stocks and concerns regarding geopolitical tensions and monetary policy decisions are contributing to the volatility in WTI prices. As investors navigate these uncertainties, staying informed about the latest updates on these factors will be crucial for making informed decisions in the oil market.