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WTI holds gains near $92.00 as Strait of Hormuz remains constrained

  • WTI rebounds on supply concerns, with Hormuz constrained amid US-Iran ceasefire uncertainty.
  • Iran’s Ghalibaf said the US breached three clauses of Iran’s proposal, calling further talks “unreasonable.”
  • Traders hesitate to unwind geopolitical risk premiums amid uncertainty over how US-Iran talks will impact oil flows.

West Texas Intermediate (WTI) oil price advances after two days of losses, trading around $91.90 per barrel during the Asian hours on Thursday. Crude oil prices regain ground on renewed supply concerns, with the Strait of Hormuz still largely constrained amid uncertainty over the United States (US)-Iran ceasefire.

Iranian media reported a halt in tanker traffic through the Strait of Hormuz following fresh Israeli strikes in Lebanon. Officials said recent developments breach the terms of the less-than-day-old ceasefire, calling it “unreasonable” to continue talks for a permanent deal with the United States.

Iranian Parliament Speaker Mohammad Bagher Ghalibaf said the US breached three key clauses of Iran’s 10-point proposal, calling further talks “unreasonable.” Meanwhile, US Vice President JD Vance signaled that the strait could begin reopening as he leads a US delegation to Islamabad for direct talks with Iran this weekend.

Reuters reported that analysts said traders are reluctant to fully unwind geopolitical risk premiums, given the lack of clarity on how US-Iran talks will affect oil flows. The Strait of Hormuz remains a critical chokepoint, linking exports from Gulf producers like Iraq, Saudi Arabia, Kuwait, and Qatar to global markets, and typically carrying about 20% of global oil and gas supply.

Analysts at Standard Chartered said logistical disruptions, security concerns, high insurance costs, and operational constraints will likely limit additional energy flows through the Strait of Hormuz over the next two weeks. Iranian media reported that authorities have issued navigation maps and designated safe routes around potential mines, coordinated with the Revolutionary Guards.

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

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.

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