WTI Oil drifts below $102.00 amid hopes of a peace deal in Iran
- Oil prices pull back from highs beyond 106.00 in speculation of a ceasefire in Iran.
- US and Iran have received a plan to end the hostilities immediately.
- Oil prices remain above the key $100.00 level, with investors in a cautious mood.
US benchmark West Texas Intermediate Oil (WTI) depreciated about $5 from session highs on Monday, hitting lows near $101.00 per barrel, from $106.44 highs, weighed by news that the US and Iran might be bringing positions closer to a peace deal through international intermediaries.
A Reuters report released on Monday confirms that Iran and the US have received a framework for a 45-day ceasefire that might end the conflict immediately, and lead to an upcoming reopening of the Strait of Hormuz. The market has reacted with a moderate risk appetite, sending Oil prices lower.
Before that, US President Donald Trump threatened Tehran with destroying Iran’s bridges and energy sites, if they failed to reopen the Hormuz by Tuesday, 8 PM Easter time (00:00 GMT). This raised concerns of Iranian retaliation targeting US industries in the Middle East and provided an additional boost to Oil prices during the early Asian session.
Crude prices have appreciated about 50% since Tehran closed the Strait of Hormuz, a critical gateway for about one-fifth of the global Oil supply, during the first weeks of the war, bringing the global economy to the brink of collapse.
This weekend, the OPEC countries and allies have agreed on raising their output quotas by 206K barrels per day in May, but the impact on prices has been minimal. The market has taken the agreement in stride, as the closure of Hormuz and the damage to oilfields in the Gulf area seriously hamper the possibility of achieving that goal.
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.