WTI falls below $70.00 on US-Iran ceasefire talks uncertainty
- WTI price drifts lower to near $69.80 in Monday’s early European session.
- US and Iran will resume talks after days of renewed attacks.
- The API weekly crude oil report will be published later on Tuesday.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $69.80 during the early European trading hours on Monday. The WTI price declines amid uncertainty surrounding US-Iran talks.
Axios reported on Monday that the US and Iran have agreed to halt attacks and plan to meet in Doha, Qatar, on Tuesday to resolve their dispute over the Strait of Hormuz. This action came after renewed military strikes between Washington and Tehran over the weekend. Iran’s neighbors, Kuwait and Bahrain, also reported incoming missiles and drones overnight.
A US official said that “both sides will stand down for now, and vessels can move freely.” ING strategists noted that traders appeared to be too optimistic about the timeline for a recovery in Persian Gulf oil supplies.
“Even so, participants appear to be shrugging off these developments, instead focusing on what a continued recovery in oil flows would mean for the global balance,” said ING’s Warren Patterson and Ewa Manthey.
Traders await the release of the American Petroleum Institute (API) weekly crude oil report, which is due 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 undermine 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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