The Islamic Revolutionary Guard Corps (IRGC) has threatened retaliation after the United States (US) carried out attacks on southern Iran in “self-defense”, CNN reported on Tuesday. The IRGC also said that 25 ships, including tankers, passed through Hormuz “in the last day and night.”
Iran’s Ministry of Foreign Affairs condemned the US attacks as a violation of the ceasefire in force since early April. Meanwhile, Iranian Supreme Leader Mojtaba Khamenei said that “the nations and lands of the region will no longer serve as a shield for American bases.”
The United States and Iran are working on a memorandum of understanding, but disagreements over language regarding Iran’s nuclear program and sanctions have held up an agreement.
One of the controversial issues under negotiation is Iran’s frozen assets worth $24 billion, with Tehran wanting half of that amount released after the agreement is signed, the semi-official Tasnim news agency reported.
Market reaction
Oil prices are attracting some buyers following this headline. At the time of writing, the West Texas Intermediate Index (WTI) is up 2.92% on the day to trade at $92.15.
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, tender 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 following 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.
