The American West Texas Intermediate (WTI) crude oil benchmark is quoted in early trading hours in Asia on Monday. The price of WTI is falling following reports that the United States (US) and Iran agreed on Tuesday to halt strikes and schedule talks in Qatar.
Washington and Tehran agreed to end more than three days of retaliatory attacks in and around the Strait of Hormuz and to begin further technical talks in Qatar on Tuesday, according to an Axios report citing unnamed US officials.
The action comes after U.S.-Iranian talks were reportedly suspended over the weekend after the United States struck Iranian military targets in retaliation for Tehran’s recent attacks on cargo ships in the Strait of Hormuz. The Islamic Revolutionary Guard Corps (IRGC) said its forces had destroyed eight US military facilities in Kuwait and Bahrain, with the attacks described as retaliation for recent US attacks on Iranian facilities.
Traders will be closely monitoring developments surrounding the US-Iran talks. Any progress in negotiations could restore the flow of oil through the Strait of Hormuz, which accounts for a fifth of global supplies. This, in turn, may cause the price of WTI to decline. On the other hand, any signs of escalating tensions in the Middle East may raise fears of disruptions in oil supplies and enhance the price of black gold in the near term.
The American Petroleum Institute’s (API) weekly crude oil report will be released later on Tuesday. A larger-than-expected decline in crude oil inventories indicates stronger demand and could enhance the price of WTI, while a larger-than-expected decline in crude oil inventories indicates weaker demand or excess supply, which could weaken the price of WTI.
Frequently asked questions about WTI crude oil
WTI Oil is a type of crude oil sold on international markets. WTI stands for West Texas Intermediate, one of three main types, including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” due to its relatively low weight and low sulfur content. It is considered a high-quality oil that can be easily refined. It originates in the United States and is distributed through the Cushing Junction, considered the “Crossroads of the World.” It is a reference point for the crude oil market, and the WTI price is often quoted in the media.
Like all assets, supply and demand are key factors influencing the price of WTI crude oil. Therefore, global growth may drive increased demand and, conversely, faint global growth. Political instability, wars and sanctions can disrupt supply and affect prices. Another key factor shaping prices are the decisions of OPEC, the group of major oil-producing countries. The value of the US dollar affects the price of WTI crude oil because oil is mainly sold in US dollars, so a weaker US dollar can make oil more affordable and vice versa.
Weekly crude oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Administration (EIA) influence the price of WTI crude oil. Inventory changes reflect fluctuations in supply and demand. If the data shows a decline in inventories, it may indicate increased demand, which will result in an enhance in the price of oil. Higher inventories may reflect increased supply, which causes prices to fall. The API report is published every Tuesday and the EIA report the next day. Their results are usually similar and are within 1% of each other 75% of the time. EIA data is considered more reliable because it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 oil-producing countries that jointly decide on production quotas for member countries at meetings held twice a year. Their decisions often influence the prices of WTI crude oil. When OPEC decides to cut quotas, it can tighten supply, which will push up oil prices. OPEC increasing production has the opposite effect. OPEC+ refers to an expanded group that includes ten additional non-OPEC members, the most notable of which is Russia.
