WTI tumbles 5% on renewed hopes of the Strait of Hormuz reopening
West Texas Intermediate (WTI) – the US oil benchmark – has witnessed a steep bearish opening gap on Monday, now losing nearly 5%, on its way to surrendering the $90 threshold.
The sell-off in the black gold is fuelled by the renewed optimism over a likely reopening of the Strait of Hormuz, which could ease the supply concerns.
The ongoing peace talks between the United States (US) and Iran have revived hopes for a potential peace agreement to be reached in the coming hours.
Despite the optimism, US President Donald Trump’s comments on Sunday suggest that both sides still have some differences, with markets eagerly awaiting further details.
“It isn’t even fully negotiated yet. So don’t listen to the losers, who are critical about something they know nothing about,” Trump posted on Truth Social.
Meanwhile, US Secretary of State Marco Rubio told the New York Times an agreement with Iran had garnered regional support, but a nuclear deal couldn’t be achieved “in 72 hours on the back of a napkin”.
Looking ahead, it remains to be seen if WTI extends its downtrend as markets pay close attention to the evolving US-Iran peace deal and fresh insights into the likely reopening of the Strait.
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.
Nothing in this material constitutes investment advice, personal recommendation, investment research, an offer, or a solicitation to buy or sell any financial instrument. The content has been prepared without consideration of your individual investment objectives, financial situation, or needs, and should not be treated as such.
Past performance is not a reliable indicator of future performance and/or results. Forward-looking scenarios or forecasts are not a guarantee of future performance. Actual results may differ materially from those anticipated.
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