WTI declines to near $90.00 despite escalating Middle East conflict, supply risks

WTI may appreciate as attacks on Saudi Arabia and an Omani tanker trigger retaliatory threats, heightening Persian Gulf supply risks.
Potential Russia-Ukraine energy ceasefire claims remain unconfirmed by Kyiv despite discussions with Western allies.
US releases 4 million barrels from strategic reserves to offset Hurricane Isaias disruptions.

Akhtar Faruqui FXStreet

West Texas Intermediate (WTI) declines after two days of gains, trading around $90.00 per barrel during Asian hours on Monday. However, crude oil prices may regain ground following deadly attacks on Riyadh’s King Khalid International Airport, which has prompted United States (US) President Donald Trump to consider joining Saudi Arabia in retaliating against Iran-backed Houthis in Yemen. The Riyadh airport was targeted again on Sunday by Houthi militants, just a day after a previous strike killed 12 people and injured more than 300.

Adding to regional supply risks, a drone struck an oil tanker near the Sohar anchorage off Oman over the weekend, just outside the Strait of Hormuz, highlighting ongoing vulnerabilities despite signs of higher crude exports from the Persian Gulf.

Meanwhile, geopolitical developments surrounding Russia and Ukraine remain uncertain. President Trump claimed that Russia and Ukraine have agreed to an "energy ceasefire," though he provided no specific details.

Ukrainian President Volodymyr Zelenskyy noted that while he discussed an energy ceasefire with leaders from Canada, Finland, and NATO, he was unaware of any agreement between Ukraine and Russia announced by Trump. However, Zelenskyy added that if Moscow were to agree to such a ceasefire, Kyiv would accept it.

US Department of Energy announced the approval of an emergency exchange involving up to 4 million barrels of crude oil from strategic reserves. This measure is intended to help mitigate supply disruptions caused by Hurricane Isaias.

Systematic flows whipsawed as WTI hovers around key CTA trigger

According to TD Securities, systematic players are struggling to find direction as “CTAs [are] whipsawing in WTI,” with recent price action underscoring that “the $90/bbl region is proving to be an important CTA level in WTI crude.” The bank notes that this zone has become a pivotal reference point for trend-following strategies, as crude repeatedly oscillates around it and triggers rapid shifts in positioning.

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.

AUD/USD eyes 0.7000 as USD remains on the back foot amid softer bond yields

AUD/USD fills a modest bearish gap on Monday, approaching 0.7000 during the Asian session amid holiday-thinned liquidity. The US Dollar remains on the back foot as US bond yields pull back from multi-year highs, supporting the pair. However, the Fed's hawkish outlook and the US-Iran standoff should limit USD losses. Moreover, diminishing odds of another RBA rate hike in November might cap the Aussie.

USD/JPY remains confined in a familiar range around 158.00

USD/JPY extends its range-bound price action at the start of a new week, trading around 158.00 as bulls remain on high alert amid speculation that authorities would step in to prop up the Japanese Yen. Furthermore, softer US bond yields keep US Dollar bulls on the back foot and cap the currency pair. However, geopolitical uncertainties could limit losses for the safe-haven buck amid thin liquidity due to a holiday in Japan and the US.

Gold advances to over one-week top, above $4,200 on softer bond yields/USD

Gold moves above $4,200 on Monday, hitting an over one-week high during the Asian session as softer US bond yields keep US Dollar bulls on the defensive. However, the US-Iran standoff over the Strait of Hormuz, along with a hawkish Fed, could limit USD losses. This could cap non-yielding bullion as traders look to US inflation figures and Fed Chair Kevin Warsh's speech for a fresh impetus during the latter part of this week.

Week ahead: US CPI, France’s budget crisis and Q3 earnings to set the market tone

The US dollar held relatively strong this week, despite the disappointing US jobs report on October 2, which further decreased the probability of a back-to-back rate hike by the Fed at the upcoming gathering on October 28.

Middle East War updates: New attack launched on Saudi airport

Here’s a brief recap of the key developments in the Middle East war that occurred over the weekend, which are expected to have a significant impact on markets in the upcoming week. In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced.

Has Bitcoin really escaped the macro forces it was built to fight?

Over 17 years ago, Satoshi Nakamoto designed Bitcoin (BTC) on the back of a global financial crisis as an alternative to the global monetary system outside the control of central banks, governments and traditional intermediaries. This raises a key question: has Bitcoin really become independent of the macroeconomic forces it was built to challenge?