WTI eases on Iran-US tensions as traders await API Crude inventory report

WTI trades around $90.15, down 0.89% on Tuesday at the time of writing.
Iran suspends message exchanges with the US through mediators.
Investors await the weekly API Crude Oil inventory report later in the day.

Ghiles Guezout FXStreet

West Texas Intermediate (WTI) edges lower on Tuesday, trading around $90.15 at the time of writing, down 0.89% on the day. Traders remain cautious as negotiations aimed at reinforcing the ceasefire between the United States (US) and Iran continue to fluctuate, creating uncertainty over the global supply outlook.

According to Iran’s Tasnim news agency, Tehran’s negotiating team has halted message exchanges with Washington through mediators due to attacks in Lebanon. In response, US President Donald Trump stated that the United States would maintain its blockade on Iranian ports. However, Trump also said that an agreement to reopen the Strait of Hormuz and extend the ceasefire with Iran could be reached within the next week.

Meanwhile, Israeli Prime Minister Benjamin Netanyahu stressed that operations against Hezbollah in southern Lebanon would continue. This situation is sustaining concerns about a broader regional escalation that could disrupt energy flows across the Middle East.

Danske Bank highlights that several members of the Organization of the Petroleum Exporting Countries and its allies (OPEC+) are reportedly considering a modest increase of around 188,000 barrels per day in their July production target. According to the analysts, such a move is unlikely to have a significant impact on prices unless it translates into higher realized exports.

Market participants are now focused on the release of the American Petroleum Institute (API) weekly Crude Oil inventory report later on Tuesday.

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

Ghiles Guezout

FXStreet

Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.

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