US early-warning radar in Bahrain targeted and destroyed, Iran's IRGC says

A US military early-warning radar system in Bahrain was struck and destroyed, Iran’s Islamic Revolutionary Guard Corps (IRGC) said on Friday, according to Reuters. The group said it carried out the attack in retaliation for an airstrike on a telecommunications tower in Sirik, a town in southern Iran.

Further attacks would lead to an unlimited confrontation, the IRGC warned. Companies working with the US on oil shipments through the Strait of Hormuz would also face tougher penalties, it threatened.

How is the market responding?

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West Texas Intermediate (WTI) is trading at $87.47 at the time of writing, a decline of 0.65% for the day.

WTI Oil: Key Questions Answered

What distinguishes WTI Oil?

Among the crude oil varieties traded internationally, WTI, short for West Texas Intermediate, is one of the three major types alongside Brent and Dubai Crude. Its relatively low gravity earns it the description “light”, while its low sulphur content accounts for the term “sweet”. This high-quality oil is considered easy to refine. Produced in the United States, it 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.

Why do WTI Oil prices move?

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. On the supply side, political instability, wars and sanctions can cause disruptions that affect prices. Another major influence is the production decisions taken by OPEC, a group of leading oil-producing countries. Since oil is traded mainly in US Dollars, the currency’s value also affects WTI crude prices: a weaker US Dollar can make oil more affordable, while a stronger one can do the opposite.

What do inventory figures mean for WTI Oil prices?

WTI oil prices respond to the weekly oil inventory reports released by the American Petroleum Institute (API) and the Energy Information Agency (EIA), as stock changes reflect shifts in supply and demand. Falling inventories can signal stronger demand and push oil prices higher; rising inventories can indicate greater supply and weigh on prices. The API releases its report every Tuesday, followed by the EIA the next day. The two sets of results generally align, coming within 1% of each other 75% of the time. As the EIA is a government agency, its figures are regarded as more reliable.

Why do OPEC decisions matter for WTI Oil prices?

At meetings held twice a year, the 12 oil-producing nations of OPEC (Organization of the Petroleum Exporting Countries) jointly set production quotas for member countries. These decisions frequently affect WTI oil prices: lower quotas can restrict supply and lift prices, while increased production has the reverse effect. The broader OPEC+ grouping brings in ten additional non-OPEC members, with Russia the most notable among them.