WTI trades higher around $75.50 after US attacks three Iranian nuclear sites
- WTI price rises over 2% amid increased supply concerns following the US strikes on three Iranian nuclear facilities.
- President Trump said that he had "obliterated" Iran's main nuclear sites, including Fordow, Natanz, and Isfahan.
- Oil prices could climb further due to potential supply threats, with Iran threatening to close the Strait of Hormuz.
West Texas Intermediate (WTI) Oil price trades around $75.50 per barrel during the Asian hours on Monday after pulling back from a five-month high of $76.74. WTI price opened higher by over 2% due to increased fears over supply concerns after the United States (US) launched strikes on three Iranian nuclear facilities over the weekend.
US President Donald Trump announced late Saturday that he had "obliterated" Iran's main nuclear sites, including Fordow, Natanz, and Isfahan, in strikes overnight, in coordination with an Israeli assault. This Middle East conflict is poised to escalate as Tehran has vowed to defend itself.
Traders expect further gains in Oil prices amid rising fears that an Iranian retaliation may shut down the Strait of Hormuz, through which roughly 20% of global crude supply flows. Iranian parliament approved a measure to close the strait. Iran has threatened to close the strait in the past but has never followed through on the move, according to Iran's Press TV via Reuters.
Reuters cited June Goh, senior analyst at Sparta Commodities, saying, "The risks of damage to Oil infrastructure have multiplied." Although there are alternative pipeline routes out of the region, there will still be crude volumes that cannot be fully exported if the Strait of Hormuz becomes inaccessible. Shipping traffic will likely decline in the area, Goh added.
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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