WTI trims gains as improving sentiment around US-Iran truce weighs

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WTI reverses earlier gains as improving sentiment around the US-Iran ceasefire eases supply concerns.
Signs of stabilization emerge with tanker traffic resuming through the Strait of Hormuz.
Saudi output disruptions cap downside as recent attacks hit key oil facilities and pipeline flows.

West Texas Intermediate (WTI) Crude Oil reverses course on Thursday, erasing earlier gains as a fresh wave of optimism sweeps through global markets, easing concerns over the durability of the US-Iran ceasefire. At the time of writing, WTI trades around $92.00 per barrel after touching a daily high of $95.20.

WTI fell nearly 10% on Wednesday after the United States and Iran reached a two-week truce. However, markets quickly turned cautious as doubts emerged over whether the agreement would hold. Iran said three points of the ceasefire had already been violated following Israeli strikes on Lebanon.

Israel claims that the ceasefire does not extend to its conflict with Hezbollah in Lebanon, while Iran insists that it does and has warned it could withdraw from the agreement if attacks continue.

These developments raised concerns that shipping through the Strait of Hormuz could remain disrupted, keeping supply risks elevated. However, signs of stabilization are now emerging. According to MarineTraffic data, the first non-Iranian Oil tanker has passed through the Strait of Hormuz since the ceasefire was announced.

Geopolitical tensions also appear to be easing somewhat. Israeli Prime Minister Benjamin Netanyahu said he has instructed his Cabinet to begin direct negotiations with Lebanon. Separately, NBC, citing a US official, reported that President Donald Trump has urged Israel to scale back strikes on Lebanon to help ensure the success of ongoing negotiations with Iran.

That said, supply-side risks remain significant. An official at Saudi Arabia’s Energy Ministry said operational activities had halted at several energy facilities in Saudi Arabia due to recent attacks, according to the Saudi State News Agency. The Khurais and Manifa fields were hit, each cutting around 300,000 barrels per day (bpd), while damage to the East-West pipeline reduced throughput by about 700,000 bpd.

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.