WTI Oil climbs as Israel-Iran, Houthi tensions eclipse OPEC+ output hike
- WTI gains more than 1.5% on Monday and trades around $89.95, supported by escalating tensions between Israel and Iran.
- Attacks claimed by the Houthis and threats from Iran fuel concerns about regional energy flows.
- Investors are downplaying the production increase announced by OPEC+, believing geopolitical risks currently outweigh additional supply.
West Texas Intermediate (WTI) US Oil trades around $89.95 at the time of writing on Monday, up 1.57% on the day, as geopolitical tensions in the Middle East continue to support energy prices.
The Crude Oil had surged earlier in the day after a fresh deterioration in relations between Israel and Iran. The Iran-backed Houthi militias announced attacks against Israel and imposed a ban on Israeli vessels in the Red Sea, while new reciprocal strikes between Israel and Iran raised fears of a broader regional conflict.
A spokesperson for Iran’s foreign ministry stated that the ceasefire had been violated repeatedly and warned that the latest developments would further undermine the peace process with the United States. Meanwhile, Iran’s Parliamentary Speaker Mohammad Baqer Ghalibaf warned that US and allied military bases in the region could become “legitimate targets,” heightening market concerns over risks to global energy supply.
These tensions come as the Strait of Hormuz remains at the center of investors’ attention. Markets continue to assess the potential impact of any prolonged disruption to this strategic waterway, through which a significant share of global Oil exports passes.
At the same time, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) announced a production increase of 188,000 barrels per day starting in July. However, the market views this increase as cautious.
However, Oil prices have trimmed a large portion of their earlier gains after reports from Fars News indicated that Iran's armed forces had announced an end to military operations against Israel. According to the report, Tehran warned that any renewed Israeli attacks on Lebanon could trigger a harsher response, although the statement has not yet been confirmed by other media outlets.
The announcement came shortly after United States (US) President Donald Trump called on both Israel and Iran to immediately halt hostilities. Following the headlines, WTI Oil retreated sharply from its intraday high near $93.50, as investors reassessed the immediate risk of a broader disruption to regional energy supplies.
According to BNY’s Bob Savage, the balance between conflict-related risks and the gradual addition of new supply will continue to drive Oil price movements in the near term. Analysts at Danske Bank also note that the recent rally reflects a reassessment of regional supply risks. The bank believes hopes for a broader agreement that could restore stable energy flows have faded following the latest military exchanges between Israel and Iran.
Looking further ahead, Société Générale argues that the Oil market may still be underestimating underlying supply pressures. The bank points out that global inventories continue to decline and believes higher prices may ultimately be required to restore a sustainable balance in the energy market.
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
Ghiles Guezout
FXStreet
Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.
