WTI holds losses near $97.50 as 30 vessels navigate through Hormuz
- WTI dips slightly after Iranian media reported 30 vessels successfully navigated the Strait of Hormuz.
- WTI crude is set to rise over 6% weekly as stalled US-Iran diplomacy keeps the Strait of Hormuz effectively closed.
- The White House said President Xi may buy more US oil to reduce China's reliance on the Strait.
West Texas Intermediate (WTI) oil price remains in the negative territory after posting modest gains in the previous day, trading around $97.60 per barrel during the Asian hours on Friday. However, WTI crude is on track to rise more than 6% this week as stalled diplomatic efforts to end the United States (US)-Iran conflict leave the strategically vital Strait of Hormuz effectively closed.
Although prices dipped slightly following reports from Iranian state media that 30 vessels had successfully navigated the Hormuz, market anxiety remains high due to recent ship seizures and attacks.
The ongoing "dual blockade" of this key shipping route has become a primary sticking point in negotiations. US President Donald Trump recently characterized the current ceasefire as being on “massive life support” after dismissing Tehran’s latest response to his peace proposal.
Amid the tension, a potential shift in energy trade emerged following a two-hour summit in Beijing between Presidents Trump and Xi Jinping. The White House reported that President Xi expressed interest in purchasing more American oil to diversify China's energy sources and reduce its reliance on the volatile Strait of Hormuz.
However, the supply outlook remains grim. The IEA reported that crude and fuel flows through the Strait plunged by approximately 4 million barrels per day during March and April. The agency warned that even if the conflict is resolved by next month, the global oil market could remain significantly undersupplied through October.
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.