WTI climbs above $95.50 as Iran says the Strait of Hormuz must remain closed
- WTI price rises to near $95.75 in Friday’s early Asian session.
- Iran’s new supreme leader says the Strait of Hormuz must remain closed.
- The IEA announced a historic release of 400 million barrels from strategic reserves to mitigate the supply.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $95.75 during the early Asian trading hours on Friday. The WTI price surges due to the effective closure of the Strait of Hormuz amid conflict involving the United States (US), Israel, and Iran.
US crude oil prices have risen more than 40% since the start of the war. The International Energy Agency (IEA) warned that the US-Israeli war on Iran was "creating the largest supply disruption in the history of the global oil market."
Iran’s new supreme leader, Mojtaba Khamenei, said in his first public statement since being appointed that the closure of the Strait of Hormuz maritime passage should be continued as a “tool to pressure the enemy.” Khamenei further stated that all US military bases in the region should be immediately closed or will be attacked.
On the other hand, a deal to release a record amount of reserves might cap the upside for the black gold. The IEA said on Wednesday that it will release a record 400 million barrels of oil in an attempt to curb the economic impact of the US-Israel war with Iran. The release of emergency oil reserves by countries coordinated through the IEA can add temporary supply to the market and prevent a sharp spike in oil prices.
WTI Oil FAQs
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.
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.
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.
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.
