WTI prices return above $60.00 as the conflict in Iran escalates
- WTI Oil prices hit seven-week highs at $60.50 on Tuesday.
- Concerns about supply disruptions from Iran are boosting Crude prices.
- Oil exports from Venezuela might resume this week and ease bullish pressure in Oil.
The US benchmark WTI Oil has appreciated more than $4 per barrel in a four-day rally, reaching nearly two-month highs at $60.50 on Tuesday, before pulling back to the $60.00 area. Investors’ fears that the unrest in Iran might cause supply disruptions in one of the world’s main Crude producers have been pushing prices over the last few days.
Riots in Iran are reported to have caused more than 650 deaths amid the regime’s fierce repression of the protesters. Tehran authorities, meanwhile, have raised their tone as the US and Israel mull action against Iran’s ballistic missile capabilities.
US President Donald Trump announced on Tuesday that a 25% additional tariff on imports to the US from countries that do business with the Islamic Republic. Trump also flagged the possibility of “very strong” action against Iran in retaliation for their handling of the protests.
Venezuela, on the other hand, is expected to resume crude Oil exports soon, which is keeping prices from rising higher.
A Reuters report on Friday stated that Commodity traders Trafigura and Vitol have agreed to provide logistical support for the sale of Venezuelan oil at the request of the US government. The report also said that the first vessel could be loaded this week.
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.
