WTI Oil dives to two-week lows sub-$90.00 amid hopes of a US-Iran peace deal
- WTI Oil falls below $90.00 for the first time in two weeks on reports of progress in the US-Iran peace talks.
- Crude prices remain about 35% above pre-war levels.
- Market analysts affirm that prices will remain high for a long time, even after Hormuz reopening.
Oil prices gapped lower at Monday’s opening times, accelerating the decline observed in the last half of the previous week. The barrel of the US benchmark West Texas Intermediate (WTI) crude is trading at $89.70 at the time of writing, about $15 down from last week’s highs, amid news of progress in the US-Iran peace talks.
US President Donald Trump boosted optimism over the weekend, affirming that a peace agreement is possible, although he ruled out any immediate breakthrough and said the US will keep the Strait of Hormuz closed until the agreement is sealed and signed.
Along the same line, the US Secretary of State Marco Rubio affirmed on Monday that negotiations with Tehran are “still a work in progress,” while the Iranian official news agency reported that central bank chiefs are flying to Qatar to deal with frozen funds from the Islamic Republic.
All these reports suggest that things are moving and contribute to keeping hopes of a swift end to the war and the reopening of the Strait of Hormuz alive. From a wider perspective, however, the barrel of Crude Oil remains about 35% above pre-war levels and is likely to remain high for some time.
The Chief of the International Energy Agency (EIA), Fatih Birol, warned last week that stockpiles are falling fast and that oil markets might enter “red” zone in July or August as the Western summer time boosts demand for Oil. Market experts have also cautioned about excessive enthusiasm as global crude supply is likely to take some time to get back to normal, even if the Strait of Hormuz reopens immediately. JP Morgan analysts have predicted that crude prices will be near $100 for most of the year.
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.