WTI US Oil rebounds toward $97 as US-Iran conflict escalates
- Oil prices advance as attacks on vessels and energy facilities revive concerns over Middle East supply.
- Iran says it is ready to intensify the conflict if US strikes on its territory and infrastructure continue.
- US crude Oil inventories decline modestly ahead of the release of official stockpile data.
West Texas Intermediate (WTI) US Oil rises sharply on Thursday, trading around $97.00 per barrel at the time of writing, up 2.93% on the day. Oil prices benefit from a renewed geopolitical risk premium as the intensifying conflict between the United States (US) and Iran raises concerns over potential disruptions to energy supplies from the Middle East.
Tensions have escalated significantly over the past week following roughly a month of relative calm. A senior Iranian official said on Wednesday that the Islamic Republic was ready for a more intense war and would step up its counterstrikes if the US continued attacking its territory and infrastructure.
Risks to maritime traffic have now become a major concern for the Oil market. According to Reuters, Iran attacked 10 ships near the Strait of Hormuz after the US sank five Iranian Oil tankers, marking the largest wave of attacks on shipping by both sides since the conflict began six months ago.
The Strait of Hormuz represents a critical route for Middle Eastern energy exports, leaving the market particularly sensitive to any threat that could reduce Oil flows through the region. Attacks by Iran-backed Houthi militants on several energy facilities in Saudi Arabia, which prompted the temporary suspension of some operations, are also adding to supply concerns.
Prospects for a rapid de-escalation also remain limited. US President Donald Trump expects the conflict to continue beyond the November midterm elections and warns that significant relief in gasoline prices is unlikely before then. These comments reinforce expectations that geopolitical tensions could continue supporting Oil prices in the near term.
On the US supply front, data from the American Petroleum Institute (API) showed that crude Oil inventories in the US declined by 300K barrels in the week ending September 4. However, the draw was smaller than the 1.3M decline expected by the market and the 2.6M drop recorded in the previous week.
Investors now await official inventory figures from the Energy Information Administration (EIA), due later on Thursday. A larger-than-expected decline in US stockpiles could provide additional support to WTI US Oil, while developments surrounding the conflict between the US and Iran are likely to remain the main driver of prices in the near term.
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.
