Crude Oil buckles early and grinds back on talk of a Hormuz arrangement
- WTI Crude Oil buckles early and grinds back, down about 3.4% on Hormuz talks.
- Gasoline supplied more than a third of the August CPI monthly increase.
- Global inventories are down 507 million barrels since the war began in February.
West Texas Intermediate (WTI) trades near $97.00, about 3.4% lower and on track for its first down session in five. The Financial Times reported on Friday that Gulf foreign ministers will meet their Iranian counterpart in the Omani city of Salalah, in a push to win backing for a temporary arrangement covering shipping through the Strait of Hormuz. The meeting is on Monday. The price moved on Friday.
Nothing moved through the strait, and the price moved anyway
Preliminary vessel tracking counted seven ships through the Strait of Hormuz on September 10, against eleven the day before. Before the war began on February 28, the waterway handled roughly 125 cargo vessels a day and about one-fifth of the world's seaborne Crude Oil and liquefied natural gas (LNG). The waterway is not congested.
Gulf producers have kept barrels moving by shuttling cargoes out to waiting tankers rather than sailing loaded ships through the strait, so exports have held up better than transit counts suggest. The cost of that workaround sits on top of every cargo, and tanker earnings are at records because of it. Friday's discount was applied to the freight, not to a barrel that has started moving again. Saudi Arabia's August output fell by around 1.9 million barrels a day, and Houthi strikes hit Saudi energy sites this week. American inventories drew a further 300K barrels in the week to September 4.
The barrel now sets the inflation rate it gets punished for
The August Consumer Price Index (CPI) rose 0.4% on the month and held at 3.4% YoY, both in line with consensus. Gasoline rose 3.9% and supplied more than a third of the monthly increase on its own. Fuel costs ran 28% higher YoY and diesel 52%, which reads as a report on the Gulf rather than on the American consumer. Diesel is the number that travels, because it prices trucking and delivery into every shelf in the country, which is how an energy shock stops being an energy shock. It was the last inflation print before the rate decision.
Core CPI rose 0.3% against a 0.2% consensus and eased to 2.4% YoY, so the part of the index that excludes energy also firmed in the month energy did the damage. Rate futures now price a quarter-point increase on September 16 at roughly 70%, which would be the first move of the year out of a target range unchanged since January at 3.50% to 3.75%. A quarter point on the funds rate does not reopen a strait.
The demand downgrade was the smaller number in its own report
The International Energy Agency (IEA) published its monthly report on Friday and cut 2026 demand by a further 940K barrels a day, taking the full-year decline to 2.5 million. The same document has supply falling 5.7 million barrels a day this year to 100.7 million, with more than 10 million barrels a day of Gulf output still shut in through August. Production is put at 100.1 million barrels a day in August, down 1.6 million on the month. Output is forecast to rebound 8 million barrels a day next year, a recovery that runs through the same strait.
Inventories have covered the difference. Observed global stocks have fallen 507 million barrels since the war began, an average draw of 2.8 million barrels a day, and August alone took out 95 million. The agency puts the Gulf recovery in 2027. The balance has been paid for out of tanks, and tanks only empty once.
One meeting has a published time and the other has a draft
The Federal Open Market Committee (FOMC) convenes on September 15 and 16, with the statement, the press conference and an updated Summary of Economic Projections (SEP) landing on the second day. Gulf ministers meet in Salalah the day before that. Rate futures put the quarter point near 70%, an events exchange nearer 57% and a prediction market nearer 49%. One European bank raised its year-end Brent forecast by $10.00 this week. Brent trades above $100.00.
The June memorandum between Washington and Tehran produced a corridor hugging the Omani coast. Iran called that southern route a breach of the memorandum and attacked ships using it, and the interim deal collapsed. It is possible Monday produces a corridor that ships actually use. Two have been announced since June.
Levels to watch
Resistance: The session high just above $100.50 is the first mark, with the $101.00 handle above it. Beyond that sits the May 18 to May 20 shelf just above $103.00, and the late-April peak short of $107.50 behind that.
Support: The session low just beneath $95.50 held the whole pullback. Thursday's low just beneath $93.00 is the next mark, and the $90.00 handle below it carries the September advance.
Bias: Higher while the $95.50 area holds, with $100.50 the first objective and $103.00 behind it. Friday's low gave back not quite half of the four-day advance, and the session has since recovered a third of that drop. The daily Stochastic Relative Strength Index (Stoch RSI) near 80 has dipped and turned back up rather than rolling over. Invalidation is a daily close beneath $93.00, which erases Thursday. A Salalah arrangement that insurers will price does it faster than any chart level, and so does a rate path that reaches demand.
WTI spot daily chart
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.
