WTI Oil hits fresh highs at $83.50 as Hormuz reopening hopes vanish
- WTI Oil hits session highs at $83.52, nearly 10% above last week's closing prices.
- US-Iran peace talks stall, dampening hopes of a swift reopening of the Strait of Hormuz.
- Iran has restructured its military top brass, naming a former IRGC commander as chief of security.
Oil prices rally for the second consecutive day on Tuesday, with the barrel of the US benchmark West Texas Intermediate (WTI) trading at $83.50 during the European trading session. WTI Oil has jumped nearly 10% from last week’s closing prices, as hopes of an upcoming peace deal between the US and Iran fade.
Growing uncertainty in the Middle East is pushing petrol prices higher this week, as the US and Iran fail to find a formula to reopen the Strait of Hormuz, entangled in reciprocal requests for compensation for war damages, which push back hopes of a durable peace agreement.
Tehran has restructured the country’s military leadership with six new senior appointments, with former Islamic Revolutionary Guard Corps (IRGC) commander Mohsen Rezaee taking over as Secretary of the Supreme National Security Council. The new security chief, a key role in Iran’s foreign policy, holds a skeptical view regarding the negotiations with the US, which is not particularly promising in regard to the peace process.
Meanwhile, traffic through the Strait of Hormuz remains restricted to a trickle. Reuters, citing shipping data, reported that only six vessels had crossed the waterway on Monday, below the 10 to 11 average of recent weeks and a marginal percentage of the 130 to 160 ships crossing the corridor before the war started in February.
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.