WTI snaps four-day rally as traders assess US-Iran talks and Hormuz flows
- WTI slides over 5%, snapping a four-day rally as traders react to signs of progress in US-Iran negotiations.
- Reports of renewed tanker movement through the Strait of Hormuz help ease fears of a prolonged supply shock.
- Pakistan-led mediation efforts raise hopes for a potential agreement between Washington and Tehran.
West Texas Intermediate (WTI) crude Oil plunges more than 5% on Wednesday, snapping a four-day winning streak as traders react to fresh geopolitical headlines that raised hopes for a potential agreement to end the US-Iran war and reopen the Strait of Hormuz. At the time of writing, WTI trades around $96.76 per barrel.
US President Donald Trump said on Wednesday that negotiations with Iran were in the final stages, though he warned that military action remained possible if no deal is reached. “There’s more fighting to come unless Iran gets smart,” Trump said.
Diplomatic efforts mediated by Pakistan continue as Washington and Tehran work to finalize the text of a possible agreement. According to Al Hadath, citing sources, Pakistani army leader Asim Munir may travel to Iran on Thursday to announce the final version of the agreement.
Meanwhile, Iran’s Islamic Revolutionary Guard Corps (IRGC) Navy said transit through the Strait of Hormuz remains ongoing with permits and coordination from Iranian authorities. The IRGC added that 26 vessels, including oil tankers, container ships and other commercial vessels, transited through the Strait over the past 24 hours.
These developments helped ease immediate supply disruption fears and contributed to the intraday pullback in crude prices, while Reuters reported that several supertankers carrying around 6 million barrels of crude successfully exited the Strait this week.
However, broader supply concerns remain elevated as the Strait of Hormuz continues to operate well below normal capacity, limiting deeper declines in Oil prices. At the same time, the fragile nature of negotiations and persistent disagreements over Iran’s nuclear program continue to keep market uncertainty elevated.
On the data front, the US Energy Information Administration (EIA) reported that Crude Oil inventories fell by 7.864 million barrels in the week ended May 15, significantly larger than market expectations for a 2.9 million-barrel draw and following the previous week’s 4.306 million-barrel decline.
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
Vishal Chaturvedi
FXStreet
I am a macro-focused research analyst with over four years of experience covering forex and commodities market. I enjoy breaking down complex economic trends and turning them into clear, actionable insights that help traders stay ahead of the curve.
