WTI Oil pulls back below $76.00 amid ongoing talks to reopen Hormuz
- WTI Crude prices pull back below $76.00 on Friday, on track for a 10% weekly decline
- Markets cling to hopes of a negotiated resolution of the Middle East conflict and free oil flows through Hormuz.
- Analysts at Rabobank warn that it will take some time for supply flows to return to pre-war levels.
Oil prices are trimming gains on Friday, with the barrel of the US benchmark West Texas Intermediate (WTI) trading just below $76.00 at the time of writing, on track for a 10% weekly decline. Hopes of a diplomatic resolution of the US-Iran conflict are keeping Oil rallies limited, as investors await the outcome of the Iran-Oman negotiations to reopen the Strait of Hormuz.
Previously, a report from the Iranian state-owned Fars news agency, saying that Tehran is considering a plan to ban US and Israeli vessels from Hormuz, raised some concerns. The plan contemplated fees between five and seven percent of the cargo for ships crossing the waterway, an idea that would collide with the US will to keep sea routes free from tolls or restrictions.
US President Donald Trump, on the other hand, showed optimism about a swift ending of the conflict and said that the Strait of Hormuz is “sort of open” and under US control, although he warned about the possibility that Iranian forces could “shoot something” or "drop a mine".
Rabobank: Oil inventories seen as finite buffer as Hormuz disruption lingers
Analysts at Rabobank caution that the current drawdown in global stockpiles remains substantial, with the world "still drawing down about 2-5 mb/d per day depending if we see another call for SPR releases, and another 5-6 mb/d of refined products." They warn that "the savings account of inventories won’t last forever," underscoring the limits of using stored crude and products to cushion ongoing supply disruptions.
Looking ahead, Rabobank’s base case assumes a protracted recovery in Crude flows, noting that "Hormuz could only return to 50-60% of prewar flows (including diversions to Yanbu/Fujairah) by 2027" while "Middle East refinery exports are assumed back to normal only by the middle of 2028." The bank highlights this "large gulf between oil and products," suggesting that refined product markets may face more persistent tightness even as crude flows gradually normalize.
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.
