WTI falls to near $87.00 on potential US-Iran ceasefire extension
- WTI falls on reports of a tentative 60-day US-Iran ceasefire extension easing Strait of Hormuz shipping tensions.
- President Trump hasn't yet approved the terms, and Vice President Vance warned a final US-Iran agreement remains uncertain.
- Oil prices fell due to a 3.3-million-barrel drop in US crude stockpiles because the draw missed analyst expectations.
West Texas Intermediate (WTI) oil price extends its losses for the third successive day, trading around $87.20 per barrel during the Asian hours on Friday. Crude oil prices have declined following reports that the United States (US) and Iran have tentatively agreed to a 60-day extension of their ceasefire, a deal that could potentially permit unrestricted shipping through the vital Strait of Hormuz.
As part of the proposed arrangement, Iran would reportedly clear all mines from the waterway within 30 days. However, the situation remains fluid, as US President Donald Trump has not yet approved the terms, and Vice President JD Vance has cautioned that it is still uncertain whether or when a final agreement will be reached.
Driven by growing optimism surrounding the US-Iran potential negotiations, the US oil benchmark has dropped nearly 15% so far this month. Despite the downward trend in prices, significant obstacles to a long-term resolution persist, most notably Tehran’s nuclear ambitions, permanent control of the Hormuz passage, and the complex issue of sanctions relief.
Adding to the downward pressure on energy markets, EIA Crude Oil Stocks Change recently revealed that the US crude oil stockpiles fell by 3.3 million barrels last week. While this marks the sixth consecutive week of inventory declines, the reduction was smaller than the 4.1-million-barrel draw that analysts polled by Reuters had anticipated, further dampening bullish sentiment.
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
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.
