WTI declines toward $82.00 as traders digest US-Iran developments
- WTI price edges lower to around $82.00 in Tuesday’s early European session.
- US airstrikes on Iran have entered their tenth consecutive day following the deaths of three US service members.
- Houthi militants in Yemen declared a maritime embargo on Saudi Arabia.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $82.00 during the early European trading hours on Tuesday. The WTI declines but remains near multi-week highs as traders continue to assess the developments surrounding the US-Iran conflicts.
US airstrikes on Iran have entered their tenth consecutive day following the deaths of three US service members. US President Donald Trump said on Monday that Iran would pay for the deaths of three US soldiers, per CNBC.
The Iranian Islamic Revolutionary Guards Corps (IRGC) said that it struck US military targets, including air defence systems in Bahrain and Kuwait. The Iranian military stated that it hit two air defence systems and a radar installation at two different US outposts in Bahrain, as well as missile defence systems and radars and satellite reception systems in Kuwait.
Yemen’s Iran-backed Houthi rebels declared a maritime embargo on Saudi Arabia. Houthi’s military spokesperson Yahya Saree said that the rebels “declare a maritime embargo against the criminal Saudi enemy, based on the equation of ‘an eye for an eye’ effective immediately upon the issuance of this statement. Fears of oil supply disruption could boost the WTI price in the near term.
Traders await the release of the American Petroleum Institute (API) weekly crude oil report, which is due later on Tuesday. A larger-than-expected crude oil inventory draw indicates stronger demand and could lift the WTI price, while a bigger build than estimated signals weaker demand or excess supply, which might undermine the WTI price.
WTI Oil FAQs
What is WTI Oil?
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.
What factors drive the price of WTI Oil?
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.
How does inventory data impact the price of WTI Oil
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.
How does OPEC influence the price of WTI Oil?
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.