WTI Oil climbs to fresh one-month highs near $84.00 as Iran’s War escalates
- WTI Oil accelerates its rally on Monday, hitting fresh monthly highs above $84.00.
- US attacked Iran for the ninth consecutive day, and Tehran said that the Strait of Hormuz will remain closed until the US aggression ends.
- Concerns about a full-on war have triggered a 23% rally in oil prices over the last two weeks.
Oil prices jumped on Monday as US and Iran hostilities escalated, threatening an all-out war, which keeps the Strait of Hormuz closed for sea traffic. In this context, the barrel of the US Benchmark West Texas Intermediate (WTI) hit prices just above $84.00, although it trades in the $ 83.70 area at the time of writing.
The US military struck targets across Iran for the ninth consecutive day on Monday, following the death of another US soldier in Iraq, after two service members died in Jordan in attacks by Tehran.
Concerns of an all-out war are boosting Oil prices
The US-Iran conflict has escalated from a series of reciprocal attacks in recent weeks to a situation increasingly reminiscent of the full-on war that drove oil prices well below $100 in March and April.
Meanwhile, the Strait of Hormuz remains blocked, and the British maritime authority has reported a vessel on fire off the coast of Oman. Iranian Islamic Revolutionary Guard Corps (IRGC) warned the US to prepare for a “punitive operation”, and affirmed that “not even a single drop” of Oil will cross the strait until the US aggression continues
Against this background, WTI Oil has regained half of the ground lost after the ceasefire agreement, reached in May. The WTI barrel is now about 23% above the early July lows, and about 25% below the $113.28 high hit in March.
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.