WTI falls to two-month low near $79.50 on US-Iran agreement

WTI price slumps to near $79.40 in Monday’s early Asian session.
Trump said an agreement with Iran had been reached and the US would end its naval blockade on the country.
US President insisted that if Iran misses the final nuclear deal with US, he would resume military strikes on Tehran.

Lallalit Srijandorn FXStreet

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $79.40 during the early Asian trading hours on Monday. The WTI price tumbles to a two-month low after reports that the United States (US) and Iran announced a peace deal to end their nearly four-month war.

Pakistan Prime Minister Shehbaz Sharif said on Sunday that Washington and Tehran have agreed on a peace deal, with both sides declaring the immediate and permanent termination of military operations on all fronts, including in Lebanon, per CNBC. Trump said later that the Strait of Hormuz would open on Friday.

“The deal with the Islamic Republic of Iran is now complete,” US President Donald Trump wrote on Truth Social. “I hereby fully authorize the toll-free opening of the Strait of Hormuz, and, simultaneously herewith, authorize the immediate removal of the United States Naval blockade,” Trump added.

The Strait of Hormuz had been effectively closed since shortly after the US and Israel launched airstrikes on Iran on February 28. Positive developments surrounding the US-Iran peace deal drag the WTI price lower.

However, the uncertainty remains high as Trump insisted that if Iran failed to reach a final nuclear accord with the US, he would resume military strikes on Tehran. If the oil disruption is prolonged, this could boost the WTI price in the near term.

The American Petroleum Institute (API) weekly crude oil report 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 undermine the WTI price.

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

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.

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