WTI swings sharply as US-Iran tensions and tanker escort reports fuel uncertainty
- WTI crude swings sharply as traders react to Middle East developments and conflicting reports about the Strait of Hormuz.
- Ongoing uncertainty around tanker security in the Strait of Hormuz keeps supply disruption fears alive.
- WTI briefly dipped below $76 after rallying to a nearly four-year high of $113.28 on Monday.
West Texas Intermediate (WTI) remains volatile on Tuesday, with sharp two-way swings as traders continue to assess the evolving geopolitical situation in the Middle East and its impact on global energy markets.
At the time of writing, the US benchmark is trading around $85.36, up roughly 2.40% on the day after briefly sliding below the $76 mark.
WTI surged to $113.28 on Monday, its highest level since June 2022, before quickly reversing after reports that G7 countries are discussing a coordinated release of Oil reserves through the International Energy Agency (IEA). The selloff accelerated after CBS reported that US President Donald Trump said, “I think the war is very complete, pretty much.”
Meanwhile, Trump has floated the idea that the United States could waive some Oil-related sanctions and deploy the US Navy to escort commercial tankers through the Strait of Hormuz.
On Tuesday, US Energy Secretary Chris Wright said in a post on X that the US had escorted an Oil tanker through the Strait of Hormuz. However, he later deleted the post, while a spokesperson for Iran’s Islamic Revolutionary Guard Corps also denied that any tanker had been escorted by the US military through the strategic waterway, according to Iranian media.
Following these conflicting reports, WTI pared some of its earlier losses as traders remain concerned about prolonged supply disruptions through the Strait of Hormuz, a vital chokepoint that handles around 20% of global Oil flows.
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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