WTI Oil holds near $92.50 as tensions flare up in the Middle East
- WTI Oil prices rise more than $4 to $92.50 due to concerns of an open Israel-Iran War.
- The Iran-backed Houthi militias announced attacks on Israel after Israeli strikes in Iran.
- A spokesperson from Iran's foreign ministry warned that these actions worsen the chaotic peace process with the US.
Crude prices have jumped by more than $4 on Monday, with the US benchmark West Texas Intermediate (WTI) barrel trading at $92.52 at the time of writing, as tensions between Israel and Iran flare, adding new strains to an already fragile ceasefire in the area.
Iran-backed Houthi militias from Yemen confirmed earlier on Monday that they targeted Israel and announced a ban on Israeli vessels in the Red Sea. These comments follow a new set of reciprocal attacks between Israel and Iran, which have raised concerns about the resumption of an all-out war in the region.
A spokesperson for Iran’s foreign ministry affirmed earlier on Monday that the truce has been repeatedly violated by opposing parties and that overnight developments would only worsen the chaotic situation of the peace process with the US. Before that, Iran's Parliamentary Speaker Mohammad Baqer Ghalibaf posted on X that after the violations of the ceasefire, the regions' US and regime bases are now "legitimate targets", in a clear threat to Gulf countries aligned with the US.
In this context, the Organisation of Petroleum Exporting Countries and allies, the so-called OPEC+, agreed to hike supply by 188K barrels from July to ease prices. This is the fifth increase in crude production since the War started in late February, all of them having been nothing more than a piece of paper as the blockade of the Strait of Hormuz impedes these barrels from reaching the 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
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.
