WTI edges higher above $103.50 as Trump intensifies Iran's infrastructure threats
- WTI price drifts higher to near $103.60 in Tuesday’s early Asian session.
- Trump doubled down on his threat to destroy Iran’s civilian infrastructure if Tehran does not agree to reopen the Strait of Hormuz.
- The eight members of OPEC+ on Sunday agreed to increase production by 206,000 bpd in May.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $103.60 during the early Asian trading hours on Tuesday. The WTI price edges higher as traders are on edge ahead of US President Donald Trump's deadline to reopen the Strait of Hormuz or face major attacks on its civilian infrastructure.
Trump said on Monday that the latest proposal for a US ceasefire with Iran is “not good enough" ahead of his deadline for Iran to either reopen the Strait of Hormuz. “It’s not good enough, but it’s a very significant step,” Trump said, adding, “They’re negotiating now, and they’ve made a very significant step. We’ll see what happens.”
Trump added that Iran could be “taken out in one night” and power plants would be rendered "burning, exploding and never to be used again.” Iran has also retaliated by saying that it will respond to the US President's threats by ramping up its own attacks on energy infrastructure in the Gulf. Severe supply disruptions in the Middle East and a high geopolitical risk premium could boost the WTI price in the near term.
The Organization of the Petroleum Exporting Countries and allies (OPEC+) on Sunday agreed to increase production by 206,000 barrels per day (bpd) in May, though it is unclear how the oil will reach the global market with the Strait still closed.
Traders brace for the release of the American Petroleum Institute (API) report, which will be published 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
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.
