WTI slides sharply after US-Iran ceasefire removes war premium
- WTI plunges over 10% on Wednesday after the US-Iran ceasefire deal.
- The fragile nature of the ceasefire and ongoing regional tensions limit further losses.
- EIA data show US crude stocks rise by 3.08M barrels, above expectations.
West Texas Intermediate (WTI) Crude Oil trades sharply lower on Wednesday, falling more than 10% after a temporary ceasefire agreement between the United States and Iran reduced the geopolitical risk premium embedded in prices. At the time of writing, WTI is trading near $89.50 per barrel, after hitting an intraday low near $86, marking its lowest level since March 25.
US President Donald Trump said on Truth Social that Washington would suspend attacks on Iran for two weeks, provided Tehran ensures the full reopening of the Strait of Hormuz. Iran signaled that safe transit through the key shipping route could be maintained during this period, raising expectations that global energy flows may normalize.
However, further downside appears limited, with prices stabilizing after the sharp pullback. Reports of continued airstrikes between Israel and Lebanon, along with warnings from Iranian officials that Tehran could withdraw from the ceasefire if attacks persist, highlight the fragile nature of the agreement.
In addition, according to the Financial Times, Saudi Arabia’s vital East-West oil pipeline, which carries crude from the Gulf to the Red Sea for export, has been attacked.
Against this backdrop, traders are likely to remain sensitive to headlines around the durability of the ceasefire, the reopening of the Strait of Hormuz, and the outcome of upcoming US-Iran negotiations scheduled later this week.
On the data front, the latest US Energy Information Administration (EIA) report showed Crude Oil inventories increased by 3.081 million barrels, compared to a rise of 5.451 million barrels in the previous week and above market expectations for a 0.7 million build.
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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