WTI slips below $90.50 despite rising Middle East supply risks
- WTI may rise as Iran threatens regional energy infrastructure following last week's nearly 10% price surge.
- Escalating attacks near the Strait of Hormuz and Saudi facilities spark severe Middle East supply disruption fears.
- Below-average US fuel inventories are tightening global oil markets further despite ongoing Persian Gulf exports.
West Texas Intermediate (WTI) oil price edges lower and is trading around $90.40 per barrel during Asian hours on Tuesday. However, crude oil prices may regain ground as Iran vowed to strike energy infrastructure across the Middle East in response to further United States (US) attacks on its assets, marking the latest escalation in a conflict that has sharply reduced regional oil supply.
Oil prices surged nearly 10% last week as renewed fighting raised fears of deeper energy disruptions, with both sides stepping up attacks over the weekend on ships and military vessels around Hormuz. Saudi Aramco’s facilities in Jazan near the Red Sea were targeted again on Monday, though damage remained limited. Additionally, Iran announced that an agreement with Oman to manage shipping through the Strait of Hormuz is nearing completion, fueling concerns over Tehran’s growing control of the key waterway.
Compounding these supply risks, the United States, the world's largest oil producer and consumer, is facing tight domestic inventory levels. Reuters cited PVM Energy analysts, noting that US stocks of gasoline and distillate fuel are substantially below year-ago and five-year seasonal averages, indicating a slightly direr picture than just a few weeks prior.
Despite these heightened geopolitical and supply risks, oil continues to flow out of the Persian Gulf, with roughly 7 million barrels a day of crude and refined products currently passing through the Strait of Hormuz.
Brent support seen holding as Societe Generale downplays risk of major correction
Analysts at Societe Generale argue that the current uptrend in Brent remains intact, noting that "signals of a large pullback are not yet visible." They add that "last week's low near $89 could provide short-term support," reinforcing their view that downside risks appear limited for now.
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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