WTI holds gains near $71.50 after cargo vessel hits near Oman
- WTI remains stronger after a suspected projectile attack on a cargo vessel near Oman threatened global shipping routes.
- UN’s International Maritime Organization suspended shipping guidance through the critical Strait of Hormuz following a suspected projectile attack.
- Rubio assured anxious Gulf allies that a finalized Iran agreement would fully safeguard their regional security interests.
West Texas Intermediate (WTI) gains ground for the second successive day, trading around $71.50 per barrel during the Asian hours on Friday. Crude oil prices surge following a suspected projectile attack on a cargo vessel near Oman, which abruptly halted United Nations (UN) evacuation efforts in the vital Strait of Hormuz and renewed anxieties over the global energy supply.
The UN’s International Maritime Organization suspended its operations to safely guide ships and seafarers through the critical corridor, sparking widespread concern that a preliminary agreement to end the war with Iran may be on the verge of collapse.
The geopolitical friction intensified after Thursday's market close when two US officials reported that Iranian forces had fired on the cargo ship as it attempted to navigate the strait. In response, Iranian authorities issued a stark warning, stating that the security of any vessels traveling outside designated Hormuz shipping routes is no longer guaranteed.
This escalation coincided with the conclusion of US Secretary of State Marco Rubio’s diplomatic tour of the Middle East. Aiming to ease deep-seated skepticism over the preliminary accord, Rubio assured nervous Gulf allies that any finalized agreement with Iran would fully protect their regional security interests.
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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