WTI declines below $88.50 on US-Iran ceasefire optimism
- WTI price edges lower to near $88.20 in Thursday’s early European session.
- Signs of possible de-escalation in the Middle East weigh on the WTI price.
- Trump's order to block Iran's ports contributes to the downside of black gold.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $88.20 during the early European trading hours on Thursday. The WTI price declines amid optimism over the ceasefire between the US and Iran.
The US and Iran have been in indirect talks aimed at extending the two-week ceasefire beyond its expiry on April 22. US President Donald Trump said the U.S.-Israeli war on Iran was "close to over," while the White House said more in-person talks would likely take place in Pakistan again. Hopes of more peace talks between the two countries ease concerns about further disruptions to energy supplies, dragging the WTI price lower.
“Resuming flows through the Strait of Hormuz remains the single most important variable in easing the pressure on energy supplies, prices and the global economy,” the IEA said in a report published Tuesday.
Oil traders are also weighing how the US blockade will affect global energy supplies. The US blockade targeting Iranian ports could further pressure remaining flows, with Washington reporting that several vessels had already turned back in the first 24 hours, even as transit via non-Iranian ports continues.
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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