WTI Oil holds around $87.00 as the US-Iran peace process teeters

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Crude prices edged lower during Monday’s European trading session, with the US benchmark West Texas Intermediate (WTI) barrel changing hands at $86.85 at the time of writing. This is down from session highs at $88.50, but significantly above Friday’s lows, at $78.90.

WTI Oil prices consolidate around $87.00, nearly 10% above Friday's lows.
Escalating tensions between the US and Iran have triggered a significant recovery in Oil prices.
Markets remain hopeful that a peace deal is still possible, which is keeping prices below the key $100 line.

Downbeat news from the Middle East has curbed investors’ optimism about the fate of the US-Iran peace process, and has buoyed Crude prices from last week's lows. Investors, however, maintain some hopes that talks might resume, which is keeping prices below the key $100 level so far.

Iranian foreign ministry spokesperson Esmail Baghaei affirmed earlier on Monday that Tehran has no plan to attend a second round of negotiations due to “aggressive acts” and violation of the ceasefire by the US.

Baghaei is highly likely referring to the seizure of an Iranian-flagged cargo vessel by the US army in the Gulf of Oman on Sunday. Tehran vowed retaliation, and Iranian state media suggested that the Islamic Republic might skip the peace talks scheduled to resume in Pakistan on Tuesday.

WTI Oil prices are now trading at levels nearly 10% above Friday’s lows but still well below the $106.50 area where they were in early April before the announcement of the ceasefire, or the nearly 5-year high at $113.28, reached after the first week of the war in March.

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.