WTI plunges on reports that US-Iran deal allows Tehran to immediately sell Oil
An article published by the Wall Street Journal (WSJ) reported that, within the US-Iran deal, Tehran will be allowed to sell Oil immediately. Alongside this, the deal waives sanctions on banking and transport to facilitate transactions.
United Against Nuclear Iran, a nonprofit, said an Iranian supertanker filled with Oil left the port of Chabahar, crossed the US blockade and was sailing out of the Gulf of Oman with its location tracker active, the first such instance since the beginning of the US blockade in April.
A senior US official said that Iran would receive sanctions relief for Oil sales, and that sustained relief would be tied to Iran fulfilling the promises agreed to in the deal, which is expected to be signed on Friday. Nevertheless, Tehran wouldn’t get immediate access to billions of US Dollars frozen by the US Treasury.
WTI Hourly Chart – Reaction to the headline
The US crude Oil benchmark tumbled to a daily low near $75.04 per barrel on the back of the WSJ report, due to an increase in global oil supply.
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
Christian Borjon Valencia
FXStreet
Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.
