West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $57.85 during Monday’s Asian session, edging lower as the United States actively pursues a peace deal between Russia and Ukraine. Traders are closely monitoring developments, with the American Petroleum Institute (API) weekly crude oil stock report due later on Tuesday.
The primary downward pressure on WTI stems from the prospect of a Ukraine-Russia peace agreement, which could significantly increase crude oil flows into an already well-supplied global market. US Secretary of State Marco Rubio indicated that President Donald Trump’s November 27 deadline for Ukraine’s support on a peace deal might extend into next week. Should a peace agreement materialize and sanctions be lifted, the influx of additional supplies into a market already forecasting a large surplus for next year could further depress WTI prices in the near term.
Conversely, growing expectations of a Federal Reserve (Fed) interest rate cut are providing some counterbalance, potentially limiting WTI’s losses. Traders have increased their bets on a rate reduction following comments from New York Fed President John Williams, who stated on Friday that the Fed could still cut rates “in the near term” without jeopardizing its inflation targets.
Lower interest rates typically weaken the US Dollar (USD), which, in turn, makes USD-denominated commodities like WTI crude oil more affordable for international buyers, thereby boosting demand. The CME FedWatch Tool currently shows Fed funds futures pricing in nearly a 74% probability of a 25-basis-point (bps) rate cut at the Fed’s December meeting, a significant jump from 40% a week ago.
