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WTI rebounds toward $91.00 as US forces conduct strikes in southern Iran

  • WTI advances on renewed supply concerns following US self-defense strikes in southern Iran on Monday.
  • Trump noted that Iran deal talks are "proceeding nicely," but warned failed negotiations could trigger renewed military attacks.
  • Three LNG tankers and a previously stranded Iraqi crude supertanker recently crossed the strait heading to Asian destinations.

West Texas Intermediate (WTI) oil price gains ground after four days of losses, trading around $90.60 per barrel during the Asian hours on Tuesday. Crude oil prices advance on renewed supply concerns after the United States (US) forces conducted self-defense strikes in southern Iran on Monday.

Fox News reported that a US Central Command spokesperson said that US forces conducted self-defense strikes in southern Iran on Monday. The spokesperson stated that the American strikes targeted missile launch sites as well as Iranian vessels attempting to deploy mines. While the US military emphasized its commitment to protecting its forces, it also stated that it would continue to exercise restraint during the ceasefire. Iranian media reported that explosions were heard in the coastal city of Bandar Abbas and surrounding areas near the Strait of Hormuz.

WTI price declined over 6% on Monday as Bloomberg reported that the US President Donald Trump said negotiations toward a deal with Iran to end their conflict and reopen the Strait of Hormuz were "proceeding nicely.” However, President Trump cautioned that a collapse in talks could trigger fresh military attacks, even as a Pakistani mediator reportedly informed China that an agreement was close.

The United States and Iran are currently discussing a framework to extend the current ceasefire for approximately two months. Under this arrangement, Washington would lift its maritime blockade, and Tehran would reopen the Strait of Hormuz.

Both sides indicated progress on a memorandum of understanding designed to halt the conflict and provide negotiators with a 60-day window to finalize a peace deal. Reflecting this tentative de-escalation, ship-tracking data showed that three liquefied natural gas tankers recently crossed the strait bound for Pakistan, China, and India. Additionally, a supertanker carrying Iraqi crude oil departed for China after being stranded for nearly three months.

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

Akhtar Faruqui

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

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