WTI rises to near $96.00 as supply concerns prevail
- WTI rises as escalating Middle East tensions elevate supply fears.
- Trump rejected Tehran's peace proposal, declaring the US-Iran ceasefire to be on massive life support.
- A Reuters survey found OPEC’s April oil output plunged to its lowest level in over twenty years.
West Texas Intermediate (WTI) oil price extends its gains for the second successive day, trading around $95.80 during the Asian hours on Tuesday. Crude oil prices are surging as Middle East tensions are threatening the world’s most critical energy transit route.
A CNN report released Monday, suggesting US President Donald Trump has expressed deepening frustration over stalled negotiations to end regional hostilities. Insiders suggest the administration is now pivotally shifting toward a resumption of military action, marking a significant escalation from previous weeks.
In a blunt assessment from the Oval Office, Trump described the current US-Iran ceasefire as being on massive life support after he formally rejected Tehran’s latest peace proposal. This breakdown has intensified fears that the Strait of Hormuz, the primary artery for global oil, will remain effectively closed for the foreseeable future.
The regional stability was further rattled by Mohammad Bagher Ghalibaf, Speaker of the Iranian Parliament. Speaking to Reuters, Ghalibaf warned that Iran's military is in a state of full readiness to retaliate against any future strikes, putting the region’s fragile ceasefire under immense strain. Tehran’s current demands for a permanent truce reportedly include an immediate end to the US naval blockade and the lifting of international economic sanctions, while the nation seeks to retain authority over maritime traffic within the key shipping route.
The tangible impact of this crisis is reflected in a Reuters survey published on Monday, which found that OPEC oil output plunged in April to its lowest level in over two decades. The near-total closure of the strait has forced major producers to curtail exports as they can no longer reliably move crude to global markets. Saudi Aramco CEO Amin Nasser delivered a stark warning, cautioning that disruptions to oil exports through the strait could delay a return to market stability until 2027. Nasser noted that the industry is currently facing the loss of about 100 million barrels of oil per week, leaving the energy sector on high alert for a prolonged period of volatility.
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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