Breaking: WTI jumps above $100.50 as Middle East war disrupts fuel supplies

WTI price climbs to near $103.85 in Monday’s early Asian session.
Escalating military aggression in the Middle East continues to boost the WTI price.
Traders await the API weekly crude oil stock report later on Tuesday.

Lallalit Srijandorn FXStreet

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $103.85 during the early Asian trading hours on Monday. The WTI price jumps to the highest since July 2022 as the escalating war in the Middle East has triggered a major disruption to global fuel supplies.

The black gold climbs over 16% on the day. The last time oil prices topped $100 per barrel was after Russia invaded Ukraine in 2022. The war in the Middle East is showing no signs of abating after the US and Israeli strikes on Iran more than a week ago. Last week, Iran effectively halted traffic in the Strait of Hormuz, where about one-fifth of global oil shipments pass.

US President Donald Trump on Friday demanded unconditional surrender from Iran, raising fears of a prolonged war that could wreak havoc on the global oil and gas market. On Iran’s front, the country named the son of the late Ayatollah Ali Khamenei as its new supreme leader, per Bloomberg.

“Right now, the biggest fear is still disruption to flows through Hormuz,” said Haris Khurshid, chief investment officer at Karobaar Capital LP in Chicago. “Production shut ins matter but the market really worries about barrels not being able to move.”

Traders brace for the release of the American Petroleum Institute (API) report, which will be released 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 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

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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