WTI slumps to three-month low near $79.00 on US-Iran peace deal optimism
- WTI price slumps to near $79.20 in Tuesday’s early European session.
- Trump announced a memorandum of understanding had been signed to bring an end to the US-Israel conflict with Iran.
- The API weekly crude oil report will be published later on Tuesday.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $79.20 during the early European trading hours on Tuesday. The WTI price falls to a three-month low after the United States (US) and Iran have agreed on a framework deal to end the war.
US President Donald Trump and Vice President JD Vance signed an electronic copy of a memorandum of understanding with Iran. Trump noted that the Strait of Hormuz “is already partially opened,” and “it’ll be completely opened” on Friday. Hopes of a US-Iran peace deal ease concerns about oil supply disruption, weighing on the WTI price.
The Strait of Hormuz had been effectively closed since shortly after the US and Israel launched airstrikes on Iran on February 28. A crucial waterway normally handles around one-fifth of global oil shipments and resulted in the shutdown of roughly 14 million barrels per day (bpd) of oil production.
However, uncertainty lingered as both sides offered differing accounts on key issues. Iranian President Masoud Pezeshkian called the US-Iran pact an "important step" toward stopping the fighting but cautioned that a final agreement for a lasting truce "has yet to take shape."
Traders brace for the American Petroleum Institute (API) weekly crude oil report, which is due later on Tuesday. A larger-than-expected crude oil inventory draw indicates stronger demand and could lift the WTI price, while a bigger build than estimated signals weaker demand or excess supply, which might undermine the WTI price.
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.
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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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