WTI falls below $79.00 to three-month lows

WTI reached a three-month low of $78.60 on Monday.
Oil supply concerns eased following reports that the US and Iran have reached a deal to end their conflict.
US-Iran deal in Switzerland on June 19 will lift blockades and sanctions in exchange for dismantling Tehran’s nuclear program.

Akhtar Faruqui FXStreet

West Texas Intermediate (WTI) crude falls around 5%, reaching a three-month low of $78.60 per barrel on Monday. Crude oil prices declined to three-month lows on easing supply concerns following reports that the United States (US) and Iran had reached a deal to end their conflict.

A breakthrough US-Iran peace agreement, announced Sunday and taking effect this Friday, will reopen the critical Strait of Hormuz. US President Donald Trump confirmed the lifting of the naval blockade on Iranian ports, while European nations, the UK, France, Germany, and Italy, stand ready to lift sanctions as Tehran dismantles its nuclear program in exchange for economic incentives.

Israeli Defense Minister Israel Katz announced that troops will stay in security zones across Lebanon, Syria, and Gaza indefinitely to safeguard borders and communities. Meanwhile, sources told Reuters that the divisive issue of Iran's nuclear program will be tackled in upcoming negotiations.

While Iran's Mehr news agency reported plans to reopen the chokepoint within 30 days under Iranian arrangements, analysts warn a full recovery will take time. Reuters cited PVM Oil Associates analyst Tamas Varga, who noted that restoring oil traffic to its pre-crisis level of 20 million barrels per day could take anywhere from weeks to months.

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 keeps range near mid-0.7100s as USD bulls await US CPI

AUD/USD steadies near mid-0.7100s in the Asian session on Friday, stalling the previous day's sharp decline to an over one-week low. The August PPI report reaffirmed Fed rate-hike bets and boosted the US Dollar on Thursday, which weighed heavily on the pair. However, hawkish RBA expectations limited losses for the Aussie as USD bulls now await the release of the US consumer inflation figures before placing fresh bets.

USD/JPY holds lower ground toward 154.00; looks to US CPI

USD/JPY holds lower ground toward 154.00 in the Asian session on Friday after hot Japanese PPI data bolster a more hawkish BoJ repricing and provide fresh impetus to the Japanese Yen. However, the downside appears capped as the US Dollar preserves overnight gains ahead of the latest US consumer inflation data.

Gold: Gains remain capped by $4,400

Gold regains composure and trades with decent gains on Friday, managing to refocus attention on the $4,440 mark per ounce troy. Therefore, the precious metal reverses Thursday’s decline as the US Dollar alternates gains with losses at the end of the week.

Week ahead: Fed, BoJ and BoE decide amid inflation dilemma

A crucial central bank week looms for markets as both the Federal Reserve and Bank of Japan are under pressure from all sides, with their credibility at stake. The Bank of England looks set to have an easier ride, at least for now, while inflation releases will be watched too as war continues to rage in the Middle East.

CFTC Report: Japanese Yen reversal leads a broader positioning reset

The week in one sentence: Yen positioning swung back into net longs in the week to September 8, leading to a 103.0K-contract improvement. Canadian Dollar shorts also fell sharply, while Oil buying accompanied another price rise. Euro, Sterling and Swiss Franc positioning weakened despite firmer currencies, leaving those moves unconfirmed by speculative flows.

Venezuela’s 65-billion-barrel Oil deal could reshape America’s inflation fight

The United States (US) has secured unprecedented access to part of Venezuela’s vast Oil reserves. The timing is particularly significant as the war with Iran is disrupting Middle Eastern supplies, keeping energy prices elevated and reviving concerns about inflation.