WTI languishes near March lows, holds above mid-$72.00s amid easing supply concerns

WTI enters a bearish consolidation phase following the recent decline to March lows.
The resumption of traffic through the Strait of Hormuz undermines the black liquid.
Mixed US-Iran messages over nuclear issues hold back bears from placing fresh bets.

Haresh Menghani FXStreet

West Texas Intermediate (WTI) – the benchmark US Crude Oil price – consolidates during the Asian session on Wednesday and currently trades just above mid-$72.00s, near its lowest level since early March, touched the previous day.

Signs of an uptick in shipping activity through the Strait of Hormuz and a temporary easing of sanctions in Iranian crude exports ease global supply concerns, which, in turn, is seen weighing on the black liquid. In fact, an Iranian military source told Fars news agency that a limited number of vessels are being allowed to pass through the strait each day under coordination with Iran’s Revolutionary Guards Navy.

Moreover, the US Treasury Department issued a temporary 60-day sanctions waiver that authorizes the production, delivery, and sale of Iranian crude oil, petroleum, and petrochemical products. The temporary relief—valid until August 21—under a broader agreement comes on top of progress in US-Iran peace talks and a lull in hostilities in Lebanon, backing the case for further depreciation of Crude Oil prices.

Despite the optimism, bearish traders seem hesitant to place aggressive bets on the black liquid amid mixed messages on Iran’s nuclear issues. According to US President Donald Trump, Iran had fully and completely agreed to the highest level of nuclear inspections long into the future. However, Iran's state media, citing the foreign ministry, reported that Tehran had made no new commitments on nuclear inspections.

This keeps geopolitical risk premiums in play and acts as a tailwind for Crude Oil prices. Furthermore, the lack of strong follow-through selling below a technically significant 200-day Simple Moving Average (SMA) warrants caution before positioning for deeper losses. Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for Crude Oil prices remains to the downside.

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

Haresh Menghani

FXStreet

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

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