West Texas Intermediate (WTI) – the benchmark US crude oil price – opens from a bearish gap early in the fresh week and continues to move away from its highest level since June 8 around the $92.25 zone reached last Thursday. The black liquid, however, is slightly recovering from the four-day low that was hit during the Asian session and is currently trading near the $84.00 level, still down almost 6% on the day.
The United States halted its bombing campaign after 13 consecutive nights of attacks on Iranian targets slow Friday, prompting Tehran to suspend retaliatory strikes against Washington’s allies in the Middle East. US Ambassador to the United Nations (UN) Mike Waltz said that while the armed forces remain locked and loaded, President Donald Trump wants to give negotiations some space. This revives hopes for a diplomatic solution to the five-month-old US-Iran conflict, which will lead to some easing of the geopolitical risk premium and put pressure on oil prices.
Meanwhile, traffic through Bab el-Mandeb dropped on July 26 after Iran-backed Houthis in Yemen attacked Saudi oil installations along the Red Sea coast. This increases concerns about significant disruptions to global oil supplies due to restricted transit through the Strait of Hormuz, keeping traders from betting aggressively on a bear market and limiting the decline in oil prices. Investors may also decide to wait for further developments around the crisis in the Middle East before confirming that the commodity price has peaked and preparing for deeper losses.
Analysts from Rabobank’s RaboResearch Global Economics & Markets team highlight that crude oil benchmarks have risen on renewed supply concerns, noting that “Brent, WTI and refined products surged after Hormuz production disruptions, intensified Russia-Ukraine strikes, CPC terminal outages and record tight diesel markets renewed fears of a broader supply crunch.” They see these overlapping disruptions as recurring concerns about the sustainability of global oil supplies, with a combination of geopolitical flashpoints and logistical bottlenecks driving the latest stage of the elaborate higher.
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, feeble 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 boost 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.
