WTI holds gains around $90.50 on Middle East supply risks despite steep weekly loss
- WTI rises as recent attacks on tankers in the Strait of Hormuz sparked renewed concerns over Middle East oil flows.
- KCM chief analyst Tim Waterer noted that persistent transit risks in the Gulf will continue to support prices on dips.
- Oil faces over an 11% weekly drop on expectations of de-escalation following US election results.
West Texas Intermediate (WTI) oil price gains ground for the second consecutive day, trading around $90.60 per barrel during European hours on Friday. Crude oil prices advanced as ongoing Middle East conflict and persistent supply concerns continued to provide a baseline floor for the market. Prices rebounded following a surge in tanker attacks in the Gulf and the Strait of Hormuz, the vital sea transit route for most Middle Eastern oil exports, which rekindled worries over regional supply disruptions.
Reuters cited KCM chief analyst Tim Waterer, who characterized Friday's price movement as a "technical recovery" following a steep selloff triggered by the US elections. However, he emphasized that the fundamental issues remain unresolved, noting that transit risks in the Strait of Hormuz persist despite the Democratic victory. "Until there is a credible path to safer, cheaper transit through the Gulf, oil is likely to remain supported on dips and prone to sharp moves on any escalation headlines," Waterer stated.
However, oil prices remain positioned for a weekly decline of over 11%. This broader drop stems from market expectations of potential de-escalation in the Iran war following election losses for US President Donald Trump's party. Prices had plunged earlier in the week as US midterm election results shifted control of both the Senate and the House of Representatives to the Democratic Party, raising hopes for a diplomatic resolution to the nine-month US-Israeli conflict with Iran.
Strait of Hormuz incident adds to oil supply concerns
Danske Bank’s analysts flag fresh supply-side risks, noting that Iran’s Revolutionary Guard reported a maritime incident in a key chokepoint. According to the bank, the Guard said that “two oil tankers and a tugboat caught fire after allegedly attempting unauthorised routes through the Strait of Hormuz,” underscoring the fragility of flows through one of the world’s most critical oil transit corridors.
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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