WTI falls to near $89.50 as Trump hints at reduced US-Iran tension
- WTI plunges as Trump called further strikes on Iran "highly unlikely" if progress is made on nuclear and shipping talks.
- Iraq secured US agreements to resume oil exports through the Strait of Hormuz, offsetting $60 billion in losses.
- Crude prices dropped despite Secretary of State Marco Rubio warning that Iran's current negotiation demands remain unacceptable.
West Texas Intermediate (WTI) oil price loses ground after remaining nearly flat in the previous day, trading around $89.60 during Asian hours on Monday. Crude oil prices fell following statements from US President Donald Trump indicating that further military strikes on Iran are "highly unlikely," provided there is significant progress in negotiations surrounding Iran's nuclear program and the reopening of the Strait of Hormuz. Trump also acknowledged that the unpopular Middle East conflict, which has driven up oil and gasoline prices, played a key role in the Republicans' historic defeat in the recent midterm elections.
Reuters reported that Trump said in a phone interview with CNN that any decision depends on whether Iran signs a strong agreement, noting that additional military action would likely be unnecessary. Despite earlier hints at renewing major attacks following the midterms, no large-scale US military operations have been launched, while Iran has warned it would respond to any future strikes by targeting US and Israeli assets.
Meanwhile, diplomatic efforts in the region show signs of progress. Iraqi Foreign Minister Fuad Hussein stated in an interview with Al Jazeera that Iraq has reached understandings with the United States to resume oil exports through the Strait of Hormuz via a shipping lane near Oman. Hussein highlighted the severe economic toll of the conflict, reporting that Iraq’s losses from the Iran war and oil export disruptions have reached $60 billion.
While oil prices plunged last week on expectations that Democrats would push for a swift end to the conflict, high-level skepticism remains. US Secretary of State Marco Rubio tempered expectations for an immediate breakthrough, describing Iran’s current negotiation demands as unacceptable.
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.
