WTI slips below $72.00 despite renewing supply concerns
- WTI may rebound as US-Iran clashes over commercial vessel attacks renew tensions in the crucial Strait of Hormuz.
- Iran's foreign ministry condemned a "blatant violation" of its agreement with the US in a newly issued statement.
- Iran’s military command denounced southern attacks as blatant aggression, promising a crushing response.
West Texas Intermediate (WTI) oil price inches lower after paring daily gains, trading around $71.70 per barrel during the European hours on Wednesday. However, crude oil prices may rise amid renewed Strait of Hormuz tensions following US airstrikes against Iran, which came in response to Iranian attacks on commercial vessels in the crucial Strait of Hormuz, including a Qatari LNG carrier and a Saudi oil tanker.
Iran's foreign ministry has condemned what it calls a "blatant violation" of its agreement with the US. Tehran accused Washington of breaking arrangements in the Strait of Hormuz, while also denouncing ongoing Israeli strikes in Lebanon.
Iranian Parliament Speaker Mohammad Bagher Ghalibaf warned that the era of bullying and extortion has ended and insisted that Iran will not fold under pressure. Meanwhile, the country's top joint military command denounced the attacks on southern Iran as blatant aggression, promising a crushing military response. Defiant over the strategic waterway, Tehran reaffirmed that it will block any US interference regarding the control and management of the Strait of Hormuz.
The sudden instability marks a sharp reversal from previous market forecasts of a supply glut, which had been expected after OPEC+ raised production quotas and Middle Eastern producers prepared to ramp up output.
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.