WTI retreats towards $89.50 after Trump hints at easing US-Iran tension

WTI slumps after Trump described further strikes on Iran as "highly unlikely" if nuclear and shipping negotiations advance.
To offset losses of $60 billion, Iraq reached agreements with the US on restarting oil exports through the Strait of Hormuz.
Crude prices retreated even as Secretary of State Marco Rubio cautioned that Iran's existing demands in negotiations remain unacceptable.

West Texas Intermediate (WTI) oil is under pressure near $89.60 in Monday's Asian session, following a largely unchanged close the previous day. The decline in crude followed comments from US President Donald Trump, who said further military strikes on Iran were "highly unlikely," conditional on substantial progress in talks over Iran's nuclear programme and the reopening of the Strait of Hormuz. Trump also recognised that the unpopular Middle East conflict had been a major factor in the Republicans' historic defeat in the recent midterm elections, having pushed oil and petrol prices higher.

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According to Reuters, Trump told CNN in a telephone interview that the decision would hinge on Iran signing a strong agreement and that further military action would probably not be needed. Although he had previously signalled the possibility of resuming major attacks after the midterms, the US has not launched any large-scale military operations. Iran, for its part, has warned that any fresh strikes would draw retaliation against US and Israeli assets.

Regional diplomacy, however, is showing signs of headway. In an interview with Al Jazeera, Iraqi Foreign Minister Fuad Hussein said Iraq and the United States had reached understandings allowing oil exports to restart through the Strait of Hormuz along a shipping lane near Oman. Underscoring the conflict's heavy economic cost, Hussein put Iraq's losses from the Iran war and disruptions to oil exports at $60 billion.

Expectations that Democrats would press for an early end to the conflict sent oil prices sharply lower last week, but scepticism persists at senior levels. Calling Iran's current negotiating demands unacceptable, US Secretary of State Marco Rubio played down the prospect of an immediate breakthrough.

WTI Oil: Key Questions Answered

What distinguishes WTI Oil?

Among the crude oil grades traded internationally, WTI, short for West Texas Intermediate, is one of the three main types alongside Brent and Dubai Crude. Its relatively low gravity and sulphur content earn it the descriptions “light” and “sweet”, respectively. This high-quality oil is considered easy to refine. Produced in the United States, it is distributed through the Cushing hub, known 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 weaker growth can have the reverse effect. On the supply side, political unrest, wars and sanctions can cause disruptions that affect prices. Production decisions by OPEC, the grouping of major oil-producing nations, are another important influence. Since oil is traded predominantly in US Dollars, the currency's value also matters: a weaker US Dollar can make WTI Crude Oil more affordable, while a stronger dollar can have the opposite effect.

Why do inventory figures affect WTI Oil prices?

WTI Oil prices respond to the weekly oil stock reports from the American Petroleum Institute (API) and the Energy Information Agency (EIA), as inventory movements reveal shifts in supply and demand. A decline in stocks may point to stronger demand and lift oil prices; an increase may signal greater supply and weigh on prices. The API releases its report each Tuesday, followed by the EIA the next day. The two sets of figures are generally close, differing by no more than 1% on 75% of occasions. As the EIA is a government agency, its data is regarded as more reliable.

Why do OPEC decisions matter for WTI Oil prices?

At meetings held twice a year, the 12 oil-producing nations in OPEC (Organization of the Petroleum Exporting Countries) jointly set production quotas for their members. These decisions frequently influence WTI Oil prices. A reduction in quotas can constrain supply and lift prices, whereas an increase in output has the reverse effect. The broader OPEC+ grouping includes ten additional non-OPEC members, with Russia the most notable.