Can WTI sustain gains near $90.50 amid Middle East supply risks despite a steep weekly loss?

WTI moves higher as tanker attacks in the Strait of Hormuz revive fears of disruption to Middle East oil supplies.
Price declines will continue to attract support while Gulf transit risks persist, according to KCM chief analyst Tim Waterer.
Oil is heading for a weekly loss of over 11%, with the US election outcome fuelling expectations of de-escalation.

Oil prices extended their recovery as the continuing Middle East conflict and lingering supply worries underpinned the market. West Texas Intermediate (WTI) was trading near $90.60 per barrel in Friday’s European session, advancing for a second straight day. The rebound followed an increase in tanker attacks in the Gulf and the Strait of Hormuz. With most Middle Eastern oil exports passing through this crucial shipping route, the attacks renewed fears of regional supply disruptions.

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Friday’s move amounted to a "technical recovery" after the sharp sell-off sparked by the US elections, Reuters reported, citing KCM chief analyst Tim Waterer. Despite the Democratic victory, Waterer stressed that the underlying problems had not been resolved and that ships still faced transit risks in the Strait of Hormuz. Waterer stated: "Until there is a credible path to safer, cheaper transit through the Gulf, oil is likely to remain supported on dips and prone to sharp moves on any escalation headlines,"

The rebound nevertheless leaves oil on course to lose over 11% for the week. Behind the broader decline are expectations that the Iran war could de-escalate after election setbacks for US President Donald Trump's party. Earlier in the week, prices slumped when the US midterm election results handed the Democratic Party control of both the Senate and the House of Representatives. That outcome lifted hopes of a diplomatic settlement to the nine-month US-Israeli conflict with Iran.

How does the Strait of Hormuz incident deepen oil supply worries?

A maritime incident reported by Iran’s Revolutionary Guard at a crucial chokepoint has prompted Danske Bank’s analysts to highlight renewed supply-side risks. The bank cited the Guard as saying that “two oil tankers and a tugboat caught fire after allegedly attempting unauthorised routes through the Strait of Hormuz,” highlighting how vulnerable oil flows remain along one of the world’s most important transit corridors.

WTI Oil: Key Questions Answered

What distinguishes WTI Oil?

Traded internationally, WTI Oil is a grade of crude whose name stands for West Texas Intermediate. Alongside Brent and Dubai Crude, it is one of the three major types. Its relatively low gravity and sulphur content earn it the descriptions “light” and “sweet”, respectively. This high-quality oil is considered easy to refine. Produced in the United States, it is distributed through the Cushing hub, known as “The Pipeline Crossroads of the World”. WTI serves as an oil-market benchmark, with its price regularly cited in media reports.

What determines movements in WTI Oil prices?

Supply and demand underpin WTI Oil prices, as they do those of other assets. Stronger global growth can lift demand, while weaker growth can have the reverse effect. Supply disruptions caused by political instability, wars or sanctions can also affect prices. Another major influence is the production policy of OPEC, a group of leading oil-producing countries. Because oil is traded mainly in US Dollars, the currency’s value also matters for WTI Crude Oil prices: a weaker US Dollar can make oil more affordable, while a stronger one can make it less so.

Why do inventory reports affect WTI Oil prices?

WTI Oil prices respond to weekly oil inventory releases from the American Petroleum Institute (API) and the Energy Information Agency (EIA), as stock changes reflect shifts in supply and demand. A fall in inventories can signal stronger demand and push prices higher. Conversely, a build-up can point to greater supply and weigh on prices. The API publishes its report every Tuesday, followed by the EIA the next day. The two sets of figures generally track each other closely, coming within 1% of one another 75% of the time. As the EIA is a government agency, its data is regarded as more reliable.

Why are OPEC decisions important for WTI Oil prices?

Production quotas agreed by OPEC frequently influence WTI Oil prices. The Organization of the Petroleum Exporting Countries comprises 12 oil-producing nations, which collectively set quotas for member countries at meetings held twice a year. A decision to cut quotas can constrain supply and lift oil prices; an increase in production can have the reverse effect. The broader OPEC+ grouping brings in ten additional non-OPEC members, with Russia the most notable among them.