WTI trades below mid-$78.00s, down nearly 8% for the day amid Iran peace deal hopes

WTI opens with a bearish gap on Monday after Trump cancelled massive strikes against Iran.
The optimism over the reopening of the Strait of Hormuz further weighs on the commodity.
The OPEC+ decision to raise production from September backs the case for further losses.

Haresh Menghani FXStreet

West Texas Intermediate (WTI) – the benchmark US Crude Oil price – struggles to register any meaningful recovery and sticks to heavy intraday losses through the early part of the European session on Monday. The commodity currently trades below mid-$78.00s, down nearly 8.00% for the day, amid renewed optimism over a potential US-Iran deal.

In fact, US President Donald Trump claimed that Mideast allies have reached the parameters of a deal on Iran's nuclear program and the full reopening of the Strait of Hormuz after calling off a massive planned attack over the weekend. Trump further told reporters that the US and Iran are set to resume negotiations Monday afternoon, fueling optimism over a diplomatic resolution to end the five-month-old war and triggering a steep decline in crude oil prices.

Meanwhile, the OPEC+ decided on Sunday to raise production quotas by about 188,000 barrels per day from September. This marks a complete unwinding of the voluntary output cuts introduced in 2023, which is seen as another factor exerting downward pressure on the black liquid. Traders, however, seem hesitant to place aggressive bearish bets on crude oil prices and opt to wait for further developments surrounding the Middle East crisis.

Analysts at Danske Bank note that in commodities, "OPEC+ approved an oil production quota increase of around 188,000 barrels per day from September, completing the rollback of a 1.65 million barrels per day cut from 2023." They point out that, despite these "successive monthly hikes over most of the year," the broader "market impact has been limited due to export disruptions caused by the Iran and Ukraine wars," tempering the effect of the formal supply restoration on overall pricing and sentiment.

The aforementioned fundamental backdrop suggests that the recent goodish recovery from a multi-month low, set in July, has run out of steam and backs the case for a further near-term depreciating move. Hence, any attempted move up is more likely to be sold into and remain limited.

WTI Oil FAQs

What is WTI Oil?

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.

What factors drive the price of WTI Oil?

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.

How does inventory data impact the price of WTI Oil

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.

How does OPEC influence the price of WTI Oil?

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.

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