WTI Oil dips to levels approaching $90.00 amid Hormuz opening rumours
- WTI Oil is trading near $90.50 on Thursday, about $17 below last week's highs.
- Rumours about negotiations to reopen the Strait of Hormuz are adding pressure on Crude prices.
- Tehran is reviewing a US proposal to end the US-Iran conflict.
Crude Oil prices extend losses for the third consecutive day on Thursday, with the US benchmark West Texas Intermediate (WTI) trading at $90.66 at the time of writing, as progress in the US-Iran peace talks has sparked speculation about the reopening of the Strait of Hormuz.
A post by Al-Hadath, a sister channel to Al Arabiya, on X, citing sources close to the negotiations, affirms that intense communications are underway to gradually reopen the Strait of Hormuz, a bottleneck for about 20% of the world’s Oil supply.
These comments follow reports of progress in the peace negotiations. According to the latest reports, Tehran would be reviewing the US's latest peace proposal, which would formally end the war. The agreement would also set the framework for nuclear talks and the reopening of the Strait of Hormuz as well as for the removal of US sanctions on Iran, according to sources cited by Reuters.
WTI Oil prices have dropped about $17 from last week’s highs, boosted by hopes of a swift end to the war, but remain nearly 40% above pre-war levels, as the future status of Hormuz remains unresolved. The market is waiting for a clear signal to reopen the critical passage to send Oil and Gas prices closer to pre-war levels.
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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