WTI extends four-day rally as Trump pauses Iran strike but supply risks persist
- WTI gains more than 1% on Tuesday and extends its rally for a fourth consecutive day.
- Donald Trump pauses a planned US strike on Iran to allow negotiations, while keeping the threat.
- India raises fuel prices to offset higher crude costs amid persistent concerns over global supply.
West Texas Intermediate (WTI) trades around $103.20 at the time of writing on Tuesday, up 1.16% on the day and extending its advance for a fourth consecutive day. Oil prices remain supported despite signs of temporary easing in Middle East tensions, with markets continuing to price in a geopolitical risk premium linked to potential supply disruptions.
Crude prices could nevertheless limit their upside after US President Donald Trump announced on Monday a pause on a planned US military attack against Iran. According to reports, the decision followed appeals from leaders of Qatar, Saudi Arabia and the United Arab Emirates (UAE) for regional de-escalation.
Donald Trump noted that serious negotiations with Tehran are currently underway, while warning that the United States (US) remains prepared to launch a large-scale military operation if discussions fail. This stance continues to keep energy markets on edge, as tensions between Washington and Tehran have fueled a sharp rise in prices in recent days.
Concerns surrounding the Strait of Hormuz also continue to support the market. This strategic waterway remains a key route for global Oil flows, while Iran’s nuclear program and sanctions continue to represent major obstacles to a lasting agreement.
On the demand side, India announced an increase in petrol and diesel prices by 87 and 91 paise per litre, respectively, in an effort to offset losses caused by rising global Crude costs. As the world’s third-largest Oil importer, developments in Indian demand are closely monitored by investors.
Comments from banks continue to highlight longer-term downside risks. Rabobank believes that increased fragmentation within the Oil market could weigh on prices in the coming years, particularly following the United Arab Emirates’ exit from the Organization of the Petroleum Exporting Countries (OPEC). Meanwhile, ING notes that the market remains extremely sensitive to headlines related to Iran and risks surrounding global supply.
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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