WTI Oil picks up above $101.00 as tensions in the Middle East remain high
- WTI Oil returns above $101.00 as hopes of a peace deal in the Middle East fade.
- Iran accused the US of not being serious about reaching a peace agreement.
- A vessel has been reported on fire in the Strait of Hormuz.
Oil is regaining some of the ground lost in previous days on Tuesday as hopes of a peace deal in the Middle East fade, while attacks on vessels attempting to cross the Strait of Hormuz continue. The US benchmark West Texas Intermediate (WTI) Oil has picked up above $101.00, although it remains well below Friday’s peak at $103.28.
Negotiators from Saudi Arabia, Pakistan and Turkey arrived in Tehran on Monday to meet the Iranian authorities and try to avoid a further escalation of the tensions, according to the Iranian Foreign Ministry.
Hopes of an upcoming peace deal, however, remain low, as Iranian authorities accused the US of not being serious about a peace deal, while the US and Israel elevated their threats against the Islamic Republic.
Meanwhile, a vessel was reported on fire in the Strait of Hormuz, about 63 nautical miles southeast of Iraq, according to reports by the United Kingdom Maritime Trade Operations (UKTMO). This corridor, which carried about 20% of the global Crude production before the war, has turned into a trap, boosting concerns about supply disruptions.
Beyond that, the Iran-backed Houthi militias from Yemen have kept targeting Saudi Arabian airports and Oil infrastructure, increasing concerns about supply. Riyadh airport was attacked on Monday, and Saudi's Civil Defense has reported further drone attacks on Tuesday after issuing emergency alerts in eastern provinces on Tuesday.
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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