WTI holds ground around $84.50 as supply risks increase due to US-Iran peace uncertainty

WTI may rise further as cautious traders see little sign of an agreement to reopen the Strait of Hormuz.
President Trump confirmed the US naval blockade remains active, adding that no negotiations with Tehran are underway.
Data on Wednesday showed that shipping through the waterway slowed significantly as shipowners avoided the area amid uncertainty over the blockade.

Akhtar Faruqui FXStreet

West Texas Intermediate (WTI) oil price moves sideways after three days of gains, trading around $84.50 per barrel during the European hours on Wednesday. Crude oil prices remain steady as ongoing geopolitical friction between the United States (US) and Iran sustained market concerns over global supply.

Oil prices may further appreciate as traders adopt caution due to little indication of a potential agreement to end the conflict and fully reopen the strategic Strait of Hormuz. US President Donald Trump confirmed that the US naval blockade remains in effect and noted there are currently no active negotiations with Tehran. Despite official assertions that the waterway is open and mines have been cleared, shipping risks stay elevated, resulting in severely restricted transit through the region.

Iranian forces have escalated operations over the past week, bringing the total number of reported vessel attacks in the Strait of Hormuz this month to eight. These incidents have targeted ships connected to Saudi Arabia and the United Arab Emirates, severely disrupting regional maritime traffic.

Data from Wednesday showed a marked slowdown in shipping through the vital waterway, as most vessel owners opted to avoid the route due to a lack of clear signals regarding the lifting of a blockade. In response, Iraq's cabinet approved new export mechanisms on Tuesday, enabling the country to route its crude oil through specialized international and local companies via alternative export outlets.

Oil gains persist as Deutsche Bank flags lack of progress on Strait of Hormuz

Deutsche Bank’s macro strategy team underscores that, “as all that was going on, there were still no signs of any negotiations to reopen the Strait of Hormuz,” a development they see as reinforcing the recent grind higher in Brent futures across the curve and the risk of a more prolonged period of elevated energy costs.

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.

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Why is Crude Oil priced for a reopening the ships haven't made?

Fourteen vessels crossed the Strait of Hormuz on Tuesday. Before the war, the count ran near 120 a day. In the sessions since the waterway was publicly declared open, Brent has drifted back to $87 and West Texas Intermediate (WTI) to $81, both a little lower again on Wednesday, with daily momentum on each unwound from the top of its range in late July to the low twenties now.