WTI stays below $102.00 as US Navy moves to restore Hormuz shipping
- WTI declines as supply disruption fears ease, with the US Navy moving to reopen the Strait of Hormuz.
- Maersk said its Alliance Fairfax, a US-flagged vehicle carrier, exited via the Strait under US military escort.
- Iran struck the UAE with drones and missiles, while the US said it destroyed Iranian boats in Hormuz.
West Texas Intermediate (WTI) oil price inches lower after registering modest gains in the previous day, trading around $101.80 per barrel during the Asian hours on Tuesday. Crude oil prices fall as fears of immediate supply disruptions ease, with the United States (US) Navy working to reopen the vital Strait of Hormuz after Iran’s attempted closure.
On Monday, the US launched a new operation to restore shipping through Hormuz, and Maersk later confirmed that its Alliance Fairfax, a US-flagged vehicle carrier, exited the via the strait under US military escort.
Reuters cited Tim Waterer, chief market analyst at KCM Trade, who said in an email, “It shows that limited safe passage is possible under current conditions and helps reduce some worst-case supply disruption fears. However, it remains more of a one-off event than a full reopening.”
Despite this, supply concerns have intensified following Iran’s attack on the United Arab Emirates (UAE). CNBC reported Monday that the UAE was targeted by Iranian drones and missiles, while the US said it destroyed Iranian boats in the Strait of Hormuz. US President Donald Trump warned that Iran would be “blown off the face of the earth” if it targets US ships protecting commercial vessels transiting the strait.
Iran’s Foreign Minister Abbas Araghchi said the current situation in the Strait of Hormuz “clearly shows there is no military solution to a political crisis.” “As talks progress with Pakistan’s gracious effort, the US should be wary of being drawn back into a quagmire by ill-wishers. The same applies to the UAE,” Araghchi said in a post on X, adding, “Project Freedom is Project Deadlock.”
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
FXStreet
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.
