WTI holds losses near $95.00 as Australia releases fuel reserves
- WTI falls after Australia’s Energy Minister Chris Bowen announced plans to release 762 million litres of fuel from reserves.
- Oil prices may further rise due to the Strait of Hormuz closure amid escalating US-Israel-Iran tensions.
- Mojtaba Khamenei said the Strait of Hormuz closure should continue as a “tool to pressure the enemy.”
West Texas Intermediate (WTI) oil price holds slight losses after surging more than 9% in the previous session, trading near $95.20 per barrel during the Asian hours on Friday. Oil prices declined after Chris Bowen, Australia’s Energy Minister, said the country would release up to 762 million litres of fuel from reserves after easing stockholding rules to address supply disruptions linked to the Iran conflict.
The Australian government also plans to reduce minimum fuel stockholding requirements by up to 20% to help stabilize domestic supply. Despite this measure, Oil prices may continue rising following the effective closure of the Strait of Hormuz amid escalating tensions involving the United States, Israel, and Iran.
US crude prices have surged more than 40% since the start of the war. The International Energy Agency (IEA) warned that the US-Israeli war on Iran is “creating the largest supply disruption in the history of the global oil market.”
Officials at the United States Department of Defense and the National Security Council reportedly underestimated Iran’s readiness to close the Strait of Hormuz in response to US military strikes while planning the ongoing operation. The Strait handles roughly one-fifth of global Oil consumption, making it one of the world’s most strategically important maritime routes. Any disruption to tanker traffic can quickly ripple through global energy markets.
Iran’s new supreme leader, Mojtaba Khamenei, said in his first public remarks since taking office that the closure of the Strait of Hormuz should remain a “tool to pressure the enemy.” Khamenei also warned that all US military bases in the region should be closed immediately or face potential attacks.
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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