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WTI slips below $93.00 following Israel-Lebanon ceasefire deal

  • WTI falls as an Israel-Lebanon ceasefire renews hopes for a broader diplomatic resolution, easing global oil supply concerns.
  • Geopolitical optimism was held in check after President Trump threatened to cancel the ceasefire if Tehran kills US troops.
  • The EIA reported US crude stockpiles fell by 8 million barrels to 433.7 million, doubling expectations in a Reuters poll.

West Texas Intermediate (WTI) price declines after three successive days of gains, trading around $92.70 per barrel during the Asian hours on Thursday. Crude oil prices fall as a ceasefire agreement between Israel and Lebanon renews hopes for a broader diplomatic resolution to the US-Israeli war with Iran, easing global supply anxieties.

Following US-led talks in Washington, a joint statement announced that the deal mandates a "complete cessation" of hostilities by Iran-backed Hezbollah. To ensure compliance, the two nations agreed to set up "pilot security zones" under the exclusive control of Lebanese armed forces, effectively shutting out non-state actors.

However, market optimism remains checked by lingering political friction and geopolitical uncertainty. The Wall Street Journal reported Thursday that US President Donald Trump told aides he would consider calling off the ceasefire if Tehran kills US troops, though he maintained that the weeks-long pause in airstrikes is still holding. In a separate interview with the New York Post, Trump noted that while a shipping blockade lasting until Labor Day is unlikely, it remains possible, effectively shifting the market's timeline for a complete reopening of the critical Strait of Hormuz.

On Wednesday, the Republican-led US House of Representatives passed a resolution to curb President Trump's war powers regarding Iran for the first time. However, the measure faces a steep legislative battle to override an expected presidential veto.

The Energy Information Administration (EIA) reported that US crude stockpiles plummeted by 8 million barrels last week to 433.7 million barrels, doubling analysts' expectations in a Reuters poll. Consequently, Reuters cited Haitong Futures, suggesting that rapidly declining global inventories are bound to keep oil prices testing the upper bounds of their current trading range.

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.

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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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