WTI slips below $89.00 despite US-Iran escalation threatening Strait of Hormuz
- WTI may rebound as US strikes Iranian targets in Hormuz after base attack and mine-laying attempts.
- Iran claims retaliation via missile strikes on US regional bases and targets in Jordan.
- US Treasury Secretary Bessent noted that 17 million barrels cleared Hormuz Monday, signaling Iran lacks control.
West Texas Intermediate (WTI) oil price edges lower after two days of gains, trading around $88.70 during the European hours on Wednesday. However, crude oil prices may rebound as escalating hostilities between the United States (US) and Iran heighten concerns over energy flow disruptions in the Middle East.
US President Donald Trump announced fresh strikes against Iranian targets around the Strait of Hormuz, framing them as retaliation for Tehran’s attempts to lay mines in the strategic waterway and a previous attack on a US military base. Trump further warned of a significantly larger military response should Iran choose to retaliate. In response, Iran claimed it had already targeted US bases across the region and launched missiles toward Jordan.
US Treasury Secretary Scott Bessent stated that Iran’s economy has entered an "acceleration phase" of bankruptcy. Bessent emphasized that despite the conflict, 17 million barrels of crude oil passed through the Strait of Hormuz on Monday, signaling that Tehran lacks control over the vital trade corridor.
Energy and aviation risks deepen as Russia-Ukraine strikes escalate
Rabobank underscores that the global energy and agricultural complex is already under strain, with "the global energy and agri sectors reeling from Russian and Ukrainian strikes." Against this backdrop, the bank highlights a further escalation in risk, noting that "seeing Trump call in US refiners" and President Zelenskyy’s warning to airlines that "‘Russian airspace will effectively be closing’ due to stepped up drone attacks" could "disrupt the global economy further." Rabobank suggests that the combination of mounting supply-side shocks and potential airspace closures adds another layer of uncertainty for both commodity markets and global trade flows.
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.