WTI extends decline as Trump signals progress in talks with Iran
- WTI Oil falls for a fifth straight day as traders assess fresh Middle East developments.
- Iran says the Strait of Hormuz could reopen within seven days if the US eases military pressure and lifts its port blockade.
- Trump’s remarks on productive talks with Iran add to expectations of a possible diplomatic breakthrough.
West Texas Intermediate (WTI) Oil extends its decline on Tuesday as traders assess fresh Middle East developments, keeping energy prices under pressure for a fifth straight day. At the time of writing, WTI trades around $89.50, near a two-week low.
Earlier on Tuesday, Oil came under heavy selling pressure after Kyodo News reported, citing a senior Iranian official, that Iran could reopen the Strait of Hormuz within seven days if Washington eases military pressure and lifts its blockade of Iranian ports.
Adding to the pressure on Oil, US President Donald Trump said on the sidelines of the UN General Assembly in New York that US officials had met with an Iranian delegation for three hours. Trump said “the Iran meeting went very well,” describing it as “very productive” and adding that another meeting is scheduled “in the near future.”
The developments have raised hopes that the Strait of Hormuz could reopen, where shipping remains heavily restricted. Only two commodity vessels crossed the waterway on Monday, down from 10 on Sunday and far below the roughly 125 large commercial vessels per day seen before the Iran war.
Brent slips as Saudi Gulf exports rise amid Iran diplomacy hopes
Analysts at Commerzbank note that “hopes for new diplomatic efforts to end the conflict with Iran and rising oil shipments from Saudi Arabia put pressure on oil prices at the start of the week,” with Brent “briefly” falling “below the USD 100-per-barrel mark for the first time in eight trading days.” According to the bank, Saudi Arabia “appears to be trying to compensate for the loss of oil shipments via the East-West Pipeline to the Red Sea,” which “was damaged following a missile attack,” by relying on “higher exports via the Persian Gulf.”
Commerzbank highlights that “approximately 14 million barrels of crude oil were loaded onto seven very large crude carriers (VLCCs) at export terminals in the Gulf on Sunday,” a move that “would continue the trend of rising Saudi Arabian oil shipments from the Gulf,” with data provider Vortexa estimating that “3.7 million barrels per day have been loaded since September 12.”
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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