WTI hovers around $89.50 as US military escorts tankers through Hormuz earlier this week
- US naval forces escorted 18 million barrels of oil through the Strait of Hormuz, calming immediate supply fears.
- Geopolitical risks from US-Iran strikes and Israeli threats continue to limit downward price movement.
- US diesel prices hit a record $5.82 per gallon amid global refinery disruptions and supply crunches.
West Texas Intermediate (WTI) oil price moves little after registering losses in the previous day, trading around $89.50 per barrel during the Asian hours on Friday. Crude oil prices remain steady following reports that the US military escorted 40 commercial vessels carrying roughly 18 million barrels of oil through the Strait of Hormuz on Tuesday.
Citing two US officials, CNN reported that forces intercepted a cruise missile and repelled multiple drone attacks during the record wartime operation. If accurate, this successful defense helps stabilize market sentiment regarding supply route security, putting slight downward pressure on global crude prices.
However, the potential drop in oil prices remains constrained by broader geopolitical tensions. Recent US strikes on Iran and renewed Israeli threats against Tehran have reignited fears of regional supply disruptions. Countering these upward price pressures, recent statements from Russian President Vladimir Putin expressing openness to peace negotiations have offered some market relief.
Meanwhile, average US diesel prices surged to record highs on Thursday as a global supply crunch intensified. Ongoing hostilities between the US and Iran, combined with disruptions caused by Ukrainian strikes on major Russian diesel-exporting refineries, pushed the US national average for diesel to $5.820 per gallon, Reuters cited GasBuddy.
Energy surplus narrows as non-energy shortfall widens
Economists at National Bank Financial highlight a notable shift in Canada’s external balances, pointing out that “Canada’s energy surplus with the world shrank from C$15.0 billion to C$14.5 billion, while the non-energy deficit expanded from C$10.8 billion to C$13.7 billion.” They note that this combination of a smaller energy buffer and a deeper shortfall in non-energy trade underscores the growing reliance on energy exports to offset broader weakness elsewhere in the trade balance.
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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