WTI Oil hits fresh one-month lows below $86.50 amid US-Iran truce extension
- WTI Oil hits fresh monthly lows sub-$86, on track for a 15% decline in the last two weeks.
- News of a US-Iran truce extension has triggered a moderate risk appetite.
- EIS Crude Oil Stocks Change figures revealed that US Oil reserves dropped for the fifth consecutive week.
Crude prices trend lower for the third day in a row on Friday, with the US benchmark West Texas Intermediate (WTI) barrel trading around $86.50 at the time of writing after hitting one-month lows a few pips below $86.00. WTI Oil is on track for a nearly 15% decline over the last two weeks.
A moderate risk-relief rally following news that Washington and Tehran have reached a memorandum of understanding to extend the ceasefire for 60 days sent oil prices and the safe-haven US Dollar lower, boosting a moderate rebound on equity markets on Friday.
The agreement, still pending US President Donald Trump’s approval, would allow negotiations on Iran’s nuclear program to continue and, according to Axios, would also lift restrictions on sea traffic through the Strait of Hormuz. Investors, however, have taken the news with only lukewarm enthusiasm.
On Thursday, data from the US Energy Information Agency (EIA) revealed that crude Oil inventories declined by 3.327 million barrels in the week of May 22. This is a softer drawdown than the 5 million forecast and less than half the 7.864 million barrels drop seen in the previous week. That said, it makes the fifth consecutive weekly decline and highlights the depletion of US energy stockpiles since the start of the Middle East conflict, keeping Oil prices from depreciating further.
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.