WTI rises above $65.50 as supply fears grow on US-Iran tensions
- WTI rises as supply concerns intensify amid escalating US-Iran tensions and increased military activity in the key Oil region.
- A US strike could disrupt Strait of Hormuz shipments, a route carrying 20% of global Oil.
- US refiners Phillips 66 and Citgo Petroleum seek direct heavy crude purchases from Venezuela’s state Oil firm PDVSA.
West Texas Intermediate (WTI) Oil price gains ground and is trading around $65.70 per barrel during the European hours on Thursday. WTI price continues to gain ground after registering 4.9% gains in the previous session as supply concerns intensified amid escalating tensions between the United States (US) and Iran, with both sides increasing military activity in the key Oil-producing region.
Any US strike could evolve into a prolonged campaign, with Israel advocating regime change in the Islamic Republic. Analysts at ANZ noted that any conflict could disrupt shipments through the Strait of Hormuz, a vital route accounting for about 20% of global Oil consumption.
US-Iran negotiations remain unresolved, with Tehran claiming a “general agreement” on the framework of a potential nuclear deal with US officials. On the other side, US Vice President JD Vance said Iran failed to meet US red lines, while President Donald Trump reiterated that military action remains an option.
According to Reuters, Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment, said tensions between Washington and Tehran remain elevated, though markets largely view a full-scale conflict as unlikely, prompting a cautious stance. Kikukawa added that Trump is unlikely to favor a sharp spike in crude prices and that any military action would probably be limited to short-term airstrikes.
US refiners Phillips 66 and Citgo Petroleum are reportedly seeking to purchase heavy crude directly from Venezuela’s state Oil firm PDVSA starting in April, bypassing trading houses and US major Chevron to improve margins.
Meanwhile, India’s state-run Bharat Petroleum Corporation Limited made its first-ever purchase of Venezuelan crude, while HPCL Mittal Energy Limited bought cargoes from the South American producer for the first time in two years, sources told Reuters.
WTI Oil FAQs
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.
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.
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.
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.
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