WTI reverses gains as hopes for US-Iran agreement improve sentiment
- WTI swings sharply as traders weigh fresh US-Iran attacks against truce headlines.
- Oil prices reverse earlier gains after Axios reports preliminary US-Iran agreement.
- Lingering uncertainty over the Strait of Hormuz keeps Oil prices elevated.
West Texas Intermediate (WTI) crude Oil sees sharp two-way price swings on Thursday as traders track rapidly changing US-Iran developments. At the time of writing, WTI is trading little changed around $88 per barrel after hitting an intraday high of $91.27.
Earlier in the day, crude prices jumped after reports of fresh attacks in the Middle East, with US armed forces targeting Iranian military sites and Iran claiming it had targeted a US airbase in the Gulf region. However, gains quickly reversed after an Axios report said the US and Iran had reached a preliminary agreement, sending WTI down to an intraday low near $86.28.
According to the report, the two sides agreed on a 60-day memorandum of understanding (MOU) to extend the current truce, though the deal still awaits final approval from US President Donald Trump.
The latest developments raised hopes that both sides may be moving closer toward a deal. Still, Oil prices did not fall much as traders waited for more details and confirmation of a final agreement, keeping WTI trading near the lower end of its recent war-driven range.
Major differences also remain unresolved, including Iran’s nuclear program and control over the vital Strait of Hormuz. On Wednesday, the US Treasury announced new Iran-related sanctions on the newly formed Persian Gulf Strait Authority.
US Treasury Secretary Scott Bessent said on Thursday the US “won’t tolerate a tolling system in Hormuz” and warned that “any willing partners in tolling in the Strait of Hormuz will be penalized.”
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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