WTI retreats below $102.50 on stronger US Dollar, Iran conflict risks curb further losses

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West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $102.40 during the early European trading hours on Friday. The WTI price edges lower amid a stronger US Dollar (USD).

WTI price loses ground to near $102.40 in Friday’s early European session.
A firmer US Dollar weighs on the WTI price, but ongoing conflict in the Middle East might cap its downside.
Trump will hear military options as part of efforts to pressure Iran into a deal.

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $102.40 during the early European trading hours on Friday. The WTI price edges lower amid a stronger US Dollar (USD). However, renewed tensions in the Middle East and the closure of the Strait of Hormuz might raise fears of prolonged supply disruptions, capping the downside for the black gold.

The US Federal Reserve (Fed) held the federal funds rate steady at 3.5% to 3.75% at its April meeting on Wednesday, as widely expected. During the press conference, Fed Chair Jerome Powell warned that near-term inflation expectations are rising, adding that he would stay on the Board of Governors for an indefinite period, even after his chairmanship ends. A hawkish hold from the Fed provides some support to the Greenback and weighs on the USD-denominated commodity price.

The United Arab Emirates (UAE) will exit the Organization of the Petroleum Exporting Countries (OPEC) on May 1, dealing a blow to the oil-producing group as an unprecedented energy crisis, caused by the Iran war, exposes discord among Gulf nations. The announcement on Tuesday came after the UAE was the target of missile and drone attacks for weeks by fellow OPEC member Iran.

Nonetheless, oil supply disruptions persist ‌as the Strait of Hormuz remains closed. This, in turn, could boost the WTI price in the near term. Reuters reported on Wednesday that US President Donald Trump is slated to receive a briefing on Thursday on plans for a series of military strikes on Iran in hopes it will return to negotiations on its nuclear program. An Iranian official said on Thursday that it would respond with "long and painful strikes" on US positions if Washington renewed attacks.

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.