WTI climbs above $99.00 as Middle East tensions escalate, Trump threatens Iran over Strait of Hormuz

WTI price rises to near $99.10 in Monday’s early European session, up 1.48% on the day.
Trump said the US would “obliterate” Iran’s power plants if the Strait of Hormuz is not reopened by Monday.
IEA Chief said he is discussing with governments across the globe that, if necessary, there will be more releases of oil stocks.

Lallalit Srijandorn FXStreet

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $99.10 during the early European trading hours on Monday. The WTI price jumps amid an escalating conflict in the Middle East. Traders brace for the release of the American Petroleum Institute (API) report, which will be published later on Tuesday.

US President Donald Trump on Saturday threatened to "obliterate" Iran's power plants if it did not fully reopen the Strait of Hormuz within 48 hours, just a day after he talked about "winding down" the war, now in its fourth week. Iran threatened to shut down the Strait of Hormuz completely in response to Trump’s ultimatum on the restoration of oil traffic through the critical waterway.

"Oil sentiment may lurch on threats and rhetoric in the near term, but its more durable direction will continue to be shaped by the state of Middle East oil flows," said Vandana Hari, founder of oil market analysis provider Vanda Insights.

The International Energy Agency (IEA) Chief, Fatih Birol, said on Monday that he is consulting with ‌governments in Asia and Europe on the release of more stockpiled oil "if necessary" due to the Iran war. “A stock release will help to comfort the markets, but this is not the solution. It will only help to reduce the pain in the economy,” said Birol. On March 11, IEA members agreed to release a record 400 million barrels of oil from strategic stockpiles to mitigate the current supply disruption.

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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