WTI Oil eases to $101.50 as Tehran flags Hormuz reopening

WTI Oil prices give away daily gains and retreat to $101.50.
Iran's Foreign Ministry assures that peace talks are ongoing and hints at Hormuz reopening.
Crude prices had reached highs near 104.00 amid fears of an imminent break of the US-Iran ceasefire.

Guillermo Alcala FXStreet

Crude Oil prices are giving away previous daily gains in the early European session on Monday. The US benchmark West Texas Intermediate barrel has retreated to the $101.50 area at the time of writing, from session highs near $104.00, as Iran’s Foreign Ministry revealed ongoing negotiations with the US and hinted at a reopening of Hormuz.

An Iranian Foreign Ministry spokesperson assured on Monday that peace talks with the US are going on around a recent proposal submitted by Tehran, and that Iranian and Omani technical teams met last week in Oman to negotiate a mechanism to restore safe transit through the Strait of Hormuz, according to reports by Iranian state media.

Previously, US President Donald Trump had warned Iranian leaders that “the clock is ticking,” urging them to move fast towards a peace deal, after a drone attack on a nuclear plant in the United Arab Emirates, put further pressure on an already-strained ceasefire.

Reports by Axios reveal that Trump met with top members of its national security team to discuss options in the Iranian war, and according to Israeli media, the US president also spoke with Prime Minister Netanyahu over the weekend.

Last week, the Chinese Prime Minister Xi Jinping agreed on the need to reopen the key waterway during the US-China summit, but he did not commit to any particular action. Meanwhile, Crude prices remain more than 30% above pre-war levels, triggering a sell-off in bond markets and strangling global economic growth.

(This story was corrected on May 18 at 10:57 GMT to amend the position of the Iranian Foreign Ministry spokesperson, from the previously stated Finance Ministry spokesperson.)

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

Guillermo Alcala

FXStreet

Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.

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