WTI Oil erases losses and returns above $92.00 as hostilities in the Gulf escalate
- WTI Oil hits session highs at 92.70 on Wednesday, its highest level in the last three months.
- Crude prices keep rising amid fears that Iran's war will escalate into a regional war.
- Goldman Sachs experts affirm that shipping disruptions could push Oil prices to $120.
Crude prices maintain their bullish tone on Wednesday, as the situation in the Middle East risks escalating into an all-out regional war. The US Benchmark West Texas Intermediate (WTI) has retraced previous losses to hit fresh three-month highs at $92.70, with the early-June highs of $94.87 in sight.
The war in Iran escalated to a new level on Tuesday as the US and Iran exchanged attacks, while the Iran-backed Houthi militias from Yemen entered the conflict, hitting oilfields in neighbouring Saudi Arabia. The Saudis have retaliated, striking targets in Yemen, in escalating dynamics that threaten to push the region into a wider conflict.
Shipping strains deepen as canal disruptions and fuel concerns mount
Attacks on vessels in the Strait of Hormuz keep Oil traffic limited in a waterway that used to carry about 20% of the global supply before the war. Rabobank analysts underscore that “maritime nations are warning that global shipping rules are collapsing, which could take much global trade with it as some worry if there is enough bunker fuel for the ships to use.”
The bank notes that rerouting is already evident, with “the Suez Canal (…) seeing more passages as tankers try to avoid Hormuz,” even as the “Panama Canal is warning of deeper transit cuts as the El Niño drought threat intensifies.” Together with still-tight energy markets, these developments underscore mounting stress across key shipping arteries and the potential for renewed cost pressures along global supply chains.
Earlier this week, Dean Struyven, co-head of global commodities research at Goldman Sachs, warned that Oil prices might reach $120 per barrel in an interview at Bloomberg TV, as "the risk of shipping disruptions broadening and intensifying is an important one."
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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