WTI plunges 9% as US election results raise hopes of an end to Iran war
- WTI slides below $90 as traders weigh the potential implications of the US midterm elections for the Iran war.
- Democrats’ victory in the US midterm elections raises prospects of political pressure to end the war with Iran.
- US crude stockpiles fall unexpectedly, but the data fails to halt the sharp decline in Oil prices.
West Texas Intermediate (WTI) slumps 9% on Wednesday, although the immediate trigger for the sharp decline remains unclear. The move could be linked to Democrats’ victory in the US midterm elections, which could put pressure on President Donald Trump to end the war with Iran. At the time of writing, the US crude benchmark trades around $87 a barrel, its lowest level in four weeks.
Senate Democratic Leader Chuck Schumer said, “We will end the war,” adding that some Republicans had joined the effort. Democratic majorities in the House and Senate could give lawmakers more scope to restrict funding for the war with Iran
Trump has also played down the prospect of immediate military action, saying the US has no immediate plans to strike Iran after earlier suggesting attacks could resume after the elections.
Meanwhile, CBS News reported that Trump is consulting advisers about replacing Defense Secretary Pete Hegseth, though no decision has been made. White House spokeswoman Anna Kelly said Trump “has full confidence in Secretary Hegseth.”
Uncertainty over negotiations persists despite ongoing diplomatic efforts. Reuters reported that Qatari mediators traveled to Tehran on Monday evening for talks with Iranian Foreign Minister Abbas Araghchi on a potential US-Iran deal.
On the data front, US crude Oil inventories fell by 865K barrels last week, according to the Energy Information Administration (EIA), against expectations of a 900K-barrel increase. Stocks declined by 1.462 million barrels in the previous week.
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.
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