WTI drifts higher above $95.50 on US-Iran tensions, Strait of Hormuz disruption fears

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West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $95.70 during the early Asian trading hours on Tuesday. The WTI price edges higher amid renewed geopolitical tensions in the Middle East.

WTI price gains ground to near $95.70 in Tuesday’s early Asian session.
Escalating US-Iran tensions and Strait of Hormuz disruptions lift the WTI price.
Trump is scheduled to arrive in Beijing later this week.

CNN reported on Monday that US President Donald Trump has grown increasingly frustrated with how the Iranians are handling talks to end the conflict, and some Trump aides say that he is now more seriously considering a resumption of major combat operations than he has in recent weeks.

Meanwhile, Iranian Parliament speaker Mohammad Bagher Ghalibaf warned that Iran’s military was fully prepared to retaliate against any future attacks. These developments came as Trump rejected Tehran’s latest peace offer over the weekend, which he called “simply unacceptable.” Fears of a prolonged closure of the Strait of Hormuz, a critical shipping route for global energy supplies, could boost the WTI price in the near term.

Trump and Chinese President Xi Jinping are set to meet on Thursday and Friday. It will be Trump’s first trip to China since 2017. The leaders of ‌the world's two largest economies will hold their first face-to-face talks in more than six months as they try to stabilize ties strained by trade, the US and Israeli war with Iran, and other areas of disagreement.

Traders await the release of the American Petroleum Institute (API) report, which will be published later on Tuesday. A larger-than-expected crude oil inventory draw indicates stronger demand and could lift the WTI price, while a bigger build than estimated signals weaker demand or excess supply, which might weigh on the WTI price.

WTI Oil FAQs

What is WTI Oil?

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.

What factors drive the price of WTI Oil?

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.

How does inventory data impact the price of WTI Oil

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.

How does OPEC influence the price of WTI Oil?

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.