WTI Oil hits highs near $91 as risks of an all-out war in the Middle East grow
- WTI Oil reaches session highs at $90.95 and posts a nearly 10% weekly rally so far.
- Reciprocal US-Iran attacks and escalating threats are boosting concerns of an all-out war in the Middle East.
- Oil traffic through the Strait of Hormuz remains low, with US inventories falling fast.
Crude prices resumed their upside trend on Thursday after some hesitation on Wednesday, with the US benchmark West Texas Intermediate reaching session highs a few cents below $91.00 per barrel, almost 10% up on the week so far.
The resumption of hostilities between the US and Iran this week is pushing Oil prices higher amid growing concerns that the region can slide into an all-out war involving neighbouring countries, which would strain Crude exports from the Gulf countries even further.
US President Donald Trump’s comments affirming that the US can strike Iran “at a much harder and higher level” have not helped to ease tensions. Trump made these remarks warning Iran against retaliation, as Tehran accused the US military of targeting a civilian wedding on Tuesday’s strikes, killing four people, and injuring dozens.
Oil traffic to Hormuz remains limited to a trickle
Meanwhile, sea traffic through the Strait of Hormuz remains limited, despite comments by US Energy Secretary Chris Wright affirming that more than 17 million barrels of Oil crossed the strategic corridor on Monday, which he considered a record traffic since the war started in late February.
Data from ship tracking services, however, contradicts those statements. Kpler traffic monitoring services reported only five ships crossing Hormuz on Monday, the day US and Iran resumed their hostilities, a 50% decline from 10 days before and a marginal percentage of the 130 average ships that used to cross the waterway before the war started.
On Wednesday, data from the US Energy Information Administration (EIA) showed that inventories continue depleting, which contributed to boost prices higher. Commercial Crude Oil stocks declined by 4,45 million barrels in the last week of August, according to EIA data, well beyond the 1.1 million drawdown forecasted by market analysts and following a 0.095 million increase in the previous week.
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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