WTI drifts higher above $93.50 on Hormuz uncertainty
WTI price trades in positive territory near $93.65 in Monday’s early Asian session. Iran gave the US a proposal for reopening the Strait of Hormuz and ending the war, Axios reported. Trump cancelled a planned trip to Pakistan by his envoys, Steve Witkoff and Jared Kushner.West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $93.65 during the Asian trading hours on Monday. The WTI price edges higher as transit through the Strait of Hormuz remains severely restricted and peace talks between the United States and Iran have stalled.
Iran has reportedly given the United States (US) a new proposal to reopen the Strait of Hormuz, bringing an end to the conflict. The plan called for extending the ceasefire so that both countries could work toward a permanent end to the war. The Pakistani mediators gave the proposal to the White House, but it’s unclear whether the US wants to explore it. Uncertainty surrounding the Strait of Hormuz raises fear of supply shock, boosting the WTI price.
US President Trump on Sunday told Jared Kushner and Steve Witkoff to skip the trip to Pakistan, which is mediating talks, saying that Iran “offered a lot, but not enough.” Iranian President Masoud Pezeshkian stated that his nation won’t enter “imposed negotiations under threats or blockade.”
Traders brace for the American Petroleum Institute (API) report, which will be published 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 weigh on the WTI price.
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 OilThe 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.
