WTI Oil price holds gains near $74.00, boosted by rising geopolitical risks
- Fears that the US might get involved in the Middle East war are buoying Oil price.
- Crude Oil futures are rallying on concerns about supply disruptions.
- Iran's ambassador to the UN has vowed a strong response if the US gets involved in the war.
Verbal escalation between US President Donald Trump and Iranian officials has boosted fears of a wider regional war in the Middle East, with the involvement of the US, which is underpinning Crude Oil prices near four-month highs.
The price of the barrel of the benchmark US West Texas Intermediate has returned above $73.00 during the European morning session, with one-month Nymex Crude Oil futures reaching the 75.00 level.
Oil price surged beyond 20% over the previous two weeks, extending its recovery from early May lows at $55 to four-month highs at $75.00. Investors' concerns that Iran might block the crucial Strait of Hormuz and drive prices well above $100 are underpinning Oil’s rally.
Oil pice appreciates as verbal tensions between the US and Iran escalate
The Iranian ambassador to the United Nations, warning against the consequences of a direct intervention of the US in the conflict, has triggered a risk-averse reaction, and a rebound in Oil prices.
Ali Bahreini accused the US of being complicit in Israel’s aggression and affirmed that Tehran will respond “strongly, proportionally and appropriately” to any direct involvement of the US in the conflict.
These comments come after Trump demanded an unconditional surrender of the Iranian Government and threatened to kill its Supreme Leader Ali Khamenei, after hastily leaving the G7 summit to meet the National Security Council.
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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