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WTI holds steady above $92.00 as Strait of Hormuz remains closed; bulls seem hesitant

  • WTI sticks to positive bias for the second straight day, though it lacks bullish conviction.
  • Tensions around the Strait of Hormuz continue to act as a tailwind for the black liquid.
  • Hopes of Iran ceasefire stabilizing keep a lid on any meaningful gains for the commodity.

West Texas Intermediate (WTI) – the benchmark US Crude Oil price – trades with a mild positive bias during the Asian session on Friday, though it lacks bullish conviction amid hopes of Iran ceasefire stabilizing. The commodity is currently placed just above the $92.00 mark, up around 0.25% for the day.

Israeli Prime Minister Benjamin Netanyahu said that he has issued an instruction to start direct negotiations with Lebanon as soon as possible, addressing a key point of contention in the fragile US-Iran ceasefire and capping Crude Oil prices. That said, Netanyahu insisted that Israel’s attacks across the country targeting Hezbollah would continue. Furthermore, tensions around the Strait of Hormuz continue to act as a tailwind for Crude Oil prices.

In fact, Iran halted shipping traffic through the strategic waterway in response to brutal Israeli attacks on Lebanon. Meanwhile, US President Donald Trump accused Iran of doing a very poor job of handling oil through the Strait of Hormuz, and that it was not the agreement they had. Trump also warned of renewed strikes if the Iran deal fails, suggesting that escalation risks remain on the table, which might continue to support Crude Oil prices.

The market attention now shifts to the release of the latest US consumer inflation figures, which might influence expectations about the Federal Reserve's (Fed) policy path and drive the US Dollar (USD). This, in turn, could provide some impetus to the USD-denominated commodity, though the focus remains glued to geopolitical developments. Nevertheless, Crude Oil prices remain on track to register heavy weekly losses.

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.

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Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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