WTI slips below $90.50 as Trump signals no pre-election strike on Iran

Oil Prices fall after Trump cited productive Iranian talks and ruled out military action before midterms, despite maintaining blockades.
Leaked reports indicated the US had prepared three-day strike plans targeting Iranian military and energy infrastructure.
Oil previously surged 5.6% following Strait of Hormuz tanker attacks and Gulf hurricane shutdowns.

Akhtar Faruqui FXStreet

West Texas Intermediate (WTI) oil price declines after posting nearly 2.5% gains in the previous day, trading around $90.30 per barrel during Asian hours on Friday. Crude oil prices fell following statements from US President Donald Trump on social media, where he announced that the US was engaged in "productive discussions" with Iran and would refrain from attacking the country prior to the midterm elections.

While asserting that record volumes of crude were currently passing through the Strait of Hormuz, President Trump emphasized that the US naval blockade of Iranian ports would remain fully operational. However, subsequent reports indicated that the US had already prepared plans for three days of targeted strikes against Iranian energy infrastructure, drone and missile stockpiles, and other strategic sites.

The sudden drop in oil prices followed a sharp rally on Thursday, during which oil prices surged by up to 5.6% due to escalating maritime tensions and weather disruptions. Tehran had intensified attacks on commercial shipping in the Strait of Hormuz, targeting nine vessels over the previous week. Concurrently, offshore production in the Gulf of Mexico faced severe threats from Hurricane Isaias, forcing regional producers to shut in approximately 1.3 million barrels per day of crude output.

Oil spike drives US yields toward multi-decade highs

Strategists at Scotiabank highlight that the latest flare-up in energy markets is feeding directly into rates, noting that “the impact on oil prices and global bond yields is clear, with WTI up $4/bbl on the day and trading back above $90/bbl as the US 10Y threatens fresh multi-decade highs above 5.35% nearing levels last seen in 2002.” They frame the move as a renewed test of investors’ tolerance for higher yields in the face of resurgent crude prices.

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.

Author

Akhtar Faruqui

FXStreet

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

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