WTI remains stronger around $86.50 as Strait of Hormuz disrupts oil supply
- WTI rises as disruptions to global fuel supplies from the Strait of Hormuz support oil prices.
- Oil prices pared losses in the previous session as Trump said the Iran war could end very soon.
- Key producers, including Saudi Arabia, the UAE, Kuwait, and Iraq, are cutting output as storage facilities rapidly fill.
West Texas Intermediate (WTI) crude oil price remains in the positive territory despite experiencing heavy volatility, trading around $86.50 per barrel during the European hours on Tuesday.
Oil prices continue to find support from significant disruptions to global fuel supplies, as the Strait of Hormuz, through which roughly 20% of global oil shipments pass, remains closed, with no clear plan yet on how countries will secure vessels transiting the crucial waterway. Trump said last week that the US Navy could escort tankers through the Strait of Hormuz in an effort to keep oil prices under control.
Crude oil prices had surged on Monday after major Middle Eastern producers began cutting output following disruptions in the Strait of Hormuz. With tanker traffic heavily restricted, several key producers, including Saudi Arabia, the United Arab Emirates, Kuwait, and Iraq, have started curbing production as storage facilities rapidly fill up.
WTI price retreated after climbing to $113.28 in the previous session, the highest level since June 2022. Oil prices pulled back after US President Donald Trump said he plans to waive oil-related sanctions. Trump also stated that the war with Iran could be resolved “very soon,” as he faces mounting economic and political pressure following days of sharp volatility in oil markets.
Meanwhile, the International Energy Agency (IEA) reportedly discussed a coordinated release of emergency oil reserves among member countries on Monday to help stabilize markets. Such a move could temporarily increase supply and prevent a sharp spike in oil 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.
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