Fears of supply disruptions from Gulf countries drive WTI Oil towards $99

WTI Oil approaches $99.00 on Wednesday as its uptrend resumes with a gain of nearly 1%.
Supply disruption fears have intensified amid more attacks on vessels in the Strait of Hormuz and Houthi threats to Saudi Arabian oilfields.
With the two sides still far apart, efforts to negotiate between the US and Iran continue to fail.

Crude prices are recovering from earlier losses on Wednesday as supply concerns strengthen. Attacks in the Strait of Hormuz are becoming more frequent, while Saudi Arabian oilfields remain threatened. West Texas Intermediate (WTI), the US oil benchmark, has gained about 1% so far on Wednesday, touching a session high just a few cents short of $99.00.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

According to a Tuesday announcement by Iran’s Revolutionary Guards Corps (IRGC), two tankers caught fire after striking sea mines south of the Strait of Hormuz. The vessels had been trying to transit the waterway along a route not authorised by Tehran.

Adding to the concerns, Yemen’s Iran-backed Houthi militias have claimed attacks on Aramco oil facilities at Yanbu. Saudi Arabia uses the Red Sea port to bypass the embattled Hormuz corridor.

Can the US and Iran break the deadlock over a peace deal?

Prospects for a peace agreement between Washington and Tehran remain uncertain. On Tuesday, a senior Pakistani army official reached Tehran as part of a fresh effort to mediate between the rivals and avert renewed fighting. Markets welcomed the development, with crude prices retreating sharply during Tuesday’s US trading session.

By Wednesday, however, US officials had dampened expectations of an early peace agreement. Speaking to US media, US Secretary of State Marco Rubio stressed the extreme difficulty of securing a deal with Iran. He also said economic pressure on the Islamic Republic would remain in place until Tehran continues targeting commercial vessels in the Strait of Hormuz.

Speaking to Iranian media, Iranian Foreign Minister Abbas Araghchi said Washington must accept Iran’s conditions before the Strait of Hormuz reopens. With the two sides locked in this cycle, the conflict is entering its eighth month without a clear end in sight.

WTI Oil: Key Questions Answered

What defines WTI Oil?

Among the crude oil varieties traded internationally, WTI, short for West Texas Intermediate, is one of three major types, alongside Brent and Dubai Crude. Its relatively low gravity and sulphur content earn it the descriptions “light” and “sweet”, respectively. This high-quality oil is regarded as 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, and media reports frequently cite its price.

Which factors shape WTI Oil prices?

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

Why do inventory figures affect WTI Oil prices?

WTI Oil prices respond to the weekly oil inventory reports issued by the American Petroleum Institute (API) and the Energy Information Agency (EIA). Inventory movements provide an indication of changes in supply and demand. Falling stocks can signal stronger demand and lift oil prices; rising stocks can point to greater supply and weigh on prices. The API releases its report every Tuesday, followed by the EIA the next day. The two reports generally produce similar results, with figures within 1% of each other 75% of the time. As the EIA is a government agency, its data is regarded as more reliable.

How can OPEC’s decisions move WTI Oil prices?

At meetings held twice a year, the 12 oil-producing nations in OPEC (Organization of the Petroleum Exporting Countries) jointly set production quotas for member countries. These decisions frequently influence WTI Oil prices. A reduction in quotas can constrain supply and lift oil prices, while an increase in OPEC production has the reverse effect. The broader OPEC+ grouping brings in ten additional non-OPEC members, with Russia the most prominent among them.