WTI Oil hits three-month lows sub-$78 on hopes of Hormuz reopening
- WTI Oil prices extend losses to three-month lows below $78.00 as details of the US-Iran deal emerge.
- Hopes of a toll-free reopening of the Strait of Hormuz have sent oil prices lower this week.
- Later on Tuesday, the API Crude Oil Stocks data is expected to highlight that crude reserves keep falling.
Crude Oil depreciates further on Tuesday, as the first details of the US-Iran deal start to emerge and hopes of the reopening of the key Strait of Hormuz grow. The US benchmark West Texas Intermediate (WTI) barrel trades at $77.77 at the time of writing, its lowest level since early March, after having depreciated nearly 25% over the last four weeks.
US President Donald Trump told reporters at the G7 summit that the peace deal with Iran is entering a “second stage,” which, in his view, will be easier. Trump, who is also expected to meet the leaders of Qatar and the United Arab Emirates (UAE) during the summit, affirmed that the war in Lebanon is “a minor one” and that it is not expected to be an obstacle to lasting peace in Iran.
Furthermore, the Israeli newspaper Hareetz, citing sources familiar with the process, stated earlier on Tuesday that the deal includes the release of an estimated total of $24 billion of frozen Iranian assets in exchange for a toll-free reopening of the Strait of Hormuz.
In the meantime, Iran’s Deputy Foreign Minister, Takht Ravanchi, said that the controversial nuclear issues will be dealt with in the next phase, including aspects concerning stockpiles, uranium enrichment and Iran’s nuclear needs.
Later on the day, the Crude Oil Stock report released weekly by the American Petroleum Institute (API) is expected to show a slowdown in the depletion of US stockpiles. Crude stocks are seen declining by 4.5 million barrels in the week of June 5, after a 9.1 million-barrel decline the previous week. Commercial Oil reserves, however, have been dropping continuously since mid-April, raising concerns about an Oil shortage.
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.