WTI retakes $74.00; remains close to multi-month top as Iran-Israel conflict fuels supply concerns
- WTI attracts fresh buyers on Thursday amid rising geopolitical tensions in the Middle East.
- The Fed’s hawkish pause lifts the USD to a one-week high and might cap the black liquid.
- Trade-related uncertainties further warrant caution before placing aggressive bullish bets.
West Texas Intermediate (WTI) US Crude Oil prices regain positive traction on Thursday amid concerns that a broader conflict in the Middle East could influence global supply. As the Israel-Iran conflict enters its seventh day, media reports suggest that US President Donald Trump has approved attack plans for Iran, but is holding off to see if Tehran will abandon its nuclear program.
The Israeli Air Force bombed Iran’s Arak heavy water reactor this morning, along with dozens of other military sites overnight. In response, Iran launched a fresh barrage of ballistic missiles, which struck Soroka Hospital in Beersheba in southern Israel, and Holon and Ramat Gan in central Israel. This, along with potential US involvement, raises the risk of an all-out war in the Middle East and acts as a tailwind for Crude Oil prices.
Meanwhile, the US Federal Reserve kept its interest rates steady on Wednesday and projected two rate cuts by the end of 2025. Policymakers, however, forecasted only one 25-basis points rate cut in each of 2026 and 2027. This, in turn, assists the US Dollar (USD) to build on its recent recovery from a three-year low and climb to over a one-week high, which acts as a headwind for USD-denominated commodities, including Oil prices.
Furthermore, the uncertainty surrounding Trump's trade policies led to concerns about reduced global economic growth, which could potentially dent fuel demand. This might further hold back traders from placing aggressive bullish bets and positioning for a further appreciating move for the black liquid. Nevertheless, Crude Oil prices remain close to a multi-month top and might continue to draw support from rising geopolitical tensions.
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
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
