WTI tumbles to near $65.00 as Trump announces Israel-Iran ceasefire
- WTI price edges lower to around $65.15 in Tuesday’s early Asian session.
- Iran’s retaliatory missile strike on a US airbase raised hopes that the conflict would not immediately disrupt oil supplies.
- The Fed’s dovish tone might weigh on the US dollar and help limit the WTI’s losses.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $65.15 during the Asian trading hours on Tuesday. The WTI price falls as US President Donald Trump said a ceasefire has been agreed upon between Iran and Israel, relieving fears of supply disruption in the region.
Iran’s parliament has voted to shut down the Strait of Hormuz in retaliation against Trump’s attack on the country over the weekend. However, no casualties were reported after the strike. Instead, Iran attacked a US military base in Qatar in retaliation for the US attacks on its nuclear facilities.
Furthermore, Trump said on Monday that a "complete and total" ceasefire between Israel and Iran will go into effect in order to end the conflict between the two nations. The initial impact of the conflict on oil and gas markets remained relatively limited, which might undermine the WTI price in the near term.
On the other hand, the dovish remarks from the Federal Reserve (Fed) officials could weigh on the Greenback and support the USD-denominated commodity price. Fed’s Vice Chair for Supervision Michelle Bowman said on Monday that the time to cut interest rates is getting nearer as risks to the job market may be on the rise. A weaker USD makes oil cheaper for foreign buyers, increasing demand and pushing prices higher.
Oil traders will take more cues from Chair Jerome Powell’s semiannual testimonies and the release of US Consumer Confidence later on Tuesday. Also, weekly crude oil stock from the American Petroleum Institute (API) is due later in the same day.
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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