WTI climbs above $86.50 on renewed US–Iran Strait of Hormuz tensions
- WTI price jumps to near $86.70 in Monday’s early Asian session.
- The sudden re-closure of the Strait of Hormuz boost the WTI price.
- Iran's military warns of imminent retaliation after US naval seizure.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $86.70 during the Asian trading hours on Monday. The WTI price rises on renewed tensions between the United States (US) and Iran in the Strait of Hormuz. Traders brace for the American Petroleum Institute (API) report, which will be published later on Tuesday.
Iran's military said that the United States (US) violated the ceasefire by firing at one of Iran's commercial ships, per Bloomberg. Iran stated that it will soon respond and retaliate against this maritime and armed robbery by the US military.
On Sunday, Iran denied it would participate in new peace talks with the US, hours after US President Donald Trump said its negotiators would head to Pakistan on Monday for a second round of peace talks with Iran. Fears of supply disruption could boost the WTI price in the near term.
Traders brace for the release of the API report later on Tuesday. A larger-than-expected crude oil inventory draw indicates stronger demand and could lift the WTI price, while a bigger build than estimated signals weaker demand or excess supply, which might weigh on the WTI price.
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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