Four tankers destroyed after striking mines near Strait of Hormuz, Iran’s IRGC says

Iran's Islamic Revolutionary Guard Corps (IRGC) reported on Wednesday that naval mines had destroyed four oil tankers attempting to pass through a route south of the Strait of Hormuz that it described as prohibited, according to Reuters.

The tankers remained on fire, a statement said, adding that two other vessels had been seized.

How is the market responding?

West Texas Intermediate (WTI) is trading at $94.55 at the time of writing, down 1.30% for the day.

WTI Oil: Key Questions Answered

What makes WTI Oil distinctive?

Among the crude oil varieties traded internationally, WTI stands for West Texas Intermediate. Alongside Brent and Dubai Crude, it is one of the three major types. Its relatively low gravity and sulphur content earn it the descriptions “light” and “sweet”, respectively. Regarded as a high-quality oil, WTI is easy to refine. It originates in the United States and is distributed through the Cushing hub, regarded as “The Pipeline Crossroads of the World”. WTI serves as an oil market benchmark, with its price regularly cited by the media.

What determines WTI Oil prices?

Supply and demand underpin WTI Oil prices, as they do those of other assets. Stronger global growth can lift demand, while weak global growth can have the reverse effect. Supply disruptions arising from political instability, wars and sanctions can affect prices. Another major influence is the set of decisions taken by OPEC, a group of leading oil-producing countries. Because oil is traded primarily in US Dollars, the currency's value also affects WTI Crude Oil prices. A weaker US Dollar can make oil more affordable, while a stronger currency can have the opposite effect.

Why do inventory figures affect WTI Oil prices?

WTI Oil prices respond to the weekly oil inventory reports from the American Petroleum Institute (API) and the Energy Information Agency (EIA), as inventory movements reflect shifts in supply and demand. A decline in stocks can signal stronger demand and push oil prices higher. Conversely, rising inventories can indicate greater supply and put downward pressure on prices. Every Tuesday, the API releases its report, followed by the EIA the next day. The two reports generally show similar results, with their figures falling within 1% of each other 75% of the time. As the EIA is a government agency, its data is regarded as more reliable.

How do OPEC's decisions affect WTI Oil prices?

At meetings held twice a year, the 12 oil-producing nations that make up OPEC (Organization of the Petroleum Exporting Countries) jointly set production quotas for member countries. These decisions frequently influence WTI Oil prices. Cutting quotas can constrain supply and drive oil prices higher, whereas increasing production can have the reverse effect. The broader OPEC+ group brings together OPEC and ten additional non-OPEC members, most notably Russia.

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