WTI Oil dips below $69 on reports of resuming US-Iran talks
- WTI Oil hits fresh four-month lows below $69.00 amid news pointing to fresh US-Iran peace talks in Doha.
- Iranian officials affirm that the talks will address some provisions of the memorandum of understanding.
- The status of the Strait of Hormuz will not be addressed until all the provisions in the memorandum are met, according to Tehran.
Crude Oil prices keep drifting lower after having closed the second quarter with the sharpest decline since 2020. The price of the US benchmark West Texas Intermediate (WTI) barrel has dropped below $69,00 on Wednesday, for the first time in the last four months, following reports of a fresh round of talks between the US and Iran.
News about the peace negotiations, however, remains confusing. The CNN news channel affirmed earlier on Wednesday that technical talks between US and Iranian negotiators resumed on Wednesday, one day after Tehran discarded any direct talks with the US this week.
Strait of Hormuz is off the table
Iranian Foreign Ministry Spokesperson, Esmail Baghaei, affirmed on Tuesday that Iranian negotiators would meet Qatari mediators to discuss “some of the provisions of the memorandum of understanding", including the issue of Iran’s restricted Assets.
Meanwhile, traffic through the Strait of Hormuz remains restricted to a trickle, compared to pre-war levels, as the status of the key waterway has become one of the main divergences between the parties. The US has called Iran to simply retreat from Hormuz and allow vessels to sail free and safely through the corridor, while Iran defends its sovereignty over the strait.
Iran’s top negotiator Mohammad Bagher Ghalibaf said earlier on Wednesday that the Strait of Hormuz is Iran’s “greatest instrument of power” in an appearance in local media and that talks about its future status will not take place until all the provisions in the memorandum are met.
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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