WTI surges above $74 as Trump confirms MoU with Iran is over
- Oil prices gain over 3% to near $74.30 amid fears that the Middle East war will restart.
- US President Trump says that the MoU with Iran is over.
- The US Central Command attacked Iran after it struck commercial ships transiting through the Strait of Hormuz.
West Texas Intermediate (WTI), futures on NYMEX, soars 3.2% to near $74.30 during the European trading session on Wednesday, the highest level seen in two weeks. The oil price surges as the confirmation from United States (US) President Donald Trump that the memorandum of understanding (MoU) with Iran, which aimed at ending the war in the Middle East, is over, has revived risks of global energy supply disruption.
Speaking at the NATO summit in Ankara, Türkiye, US President Trump said, I think the MoU with Iran is over.” Trump added, “We attacked very powerfully last night, the very dangerous people from Iran. They're sick; there's something wrong with them," Moneycontrol reported.
Last night, the US Central Command confirmed attacking Iran’s military infrastructure in response to Tehran striking commercial ships transiting through the Strait of Hormuz, a vital passage to almost one-fifth of the global energy supply, on Tuesday.
The oil price could gain further if the war in the Middle East restarted. Oil prices gained almost 70% in the first nine days of March when the war in the Middle East started, and Iran closed the Hormuz as a response to collective attacks from the US and Israel.
Currencies from economies that rely heavily on oil imports to meet their energy needs are expected to be major victims of higher oil prices.
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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