WTI climbs to four-month highs above $64 on US-Iran tensions

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West Texas Intermediate (WTI) Oil prices extends its gains for the third successive session, trading around $64.00 per barrel during the early European hours on Thursday.

WTI reaches four-month highs as US-Iran tensions heighten supply risk concerns.
US warnings of possible military action over Iran’s nuclear deal raised supply disruption fears.
WTI crude inventories fell 2.296 million barrels in the week ended January 24, after a 3.602 million-barrel build.

West Texas Intermediate (WTI) Oil prices extends its gains for the third successive session, trading around $64.00 per barrel during the early European hours on Thursday. WTI crude surged to four-month highs due to rising supply risks amid geopolitical tensions between the United States (US) and Iran.

The US warned of possible military action if Iran fails to secure a nuclear deal fueled fears of supply disruptions. US President Donald Trump said a substantial US naval force in the region is prepared to act “with speed and violence, if necessary,” heightening concerns that conflict could disrupt Middle East oil flows, which account for about one-third of global supply.

Markets also fear that Iranian retaliation could disrupt shipping through the Strait of Hormuz, a vital route for Oil and LNG. While Iran says it is open to talks, it has warned of an unprecedented response if provoked and is stepping up diplomacy with regional powers to avoid further escalation.

Oil prices rose after the US Energy Information Administration (EIA) reported that crude inventories fell by 2.296 million barrels in the week ended January 24, versus a 3.602 million-barrel build the prior week. The surprise drawdown signaled stronger Oil demand.

However, dollar-denominated crude prices may face headwinds as demand for the US Dollar (USD) rebounded after Treasury Secretary Scott Bessent reaffirmed the US commitment to a “strong dollar policy.” Bessent emphasized that robust US fundamentals and sound policy settings should continue to attract capital inflows, dismissing speculation about US intervention to sell dollars against the Japanese Yen.

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.