Near $89.50: WTI retreats as Trump hints at easing US-Iran tensions

WTI tumbles after Trump described further Iran strikes as "highly unlikely" if nuclear and shipping negotiations advance.
$60 billion in losses are being offset as Iraq secured US agreements to restart oil exports through the Strait of Hormuz.
Despite Secretary of State Marco Rubio's warning that Iran's negotiating demands remain unacceptable, crude prices retreated.

$89.60 is the approximate price of West Texas Intermediate (WTI) oil in Monday's Asian session. Prices are declining after a largely unchanged previous session. The fall in crude followed comments from US President Donald Trump, who said further military strikes on Iran were "highly unlikely," conditional on significant progress in talks on Iran's nuclear programme and reopening the Strait of Hormuz. Trump also recognised that the unpopular Middle East conflict had been a key factor in the Republicans' historic defeat in the recent midterm elections. The conflict has lifted oil and petrol prices.

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A strong agreement signed by Iran would determine any decision, Trump told CNN in a telephone interview reported by Reuters. He indicated that further military action would probably not be needed. Although major attacks had earlier been suggested as a possibility after the midterms, the US has not launched large-scale military operations. Iran, meanwhile, has warned that any future strikes would prompt it to target US and Israeli assets.

Regional diplomacy is showing signs of headway. In an Al Jazeera interview, Iraqi Foreign Minister Fuad Hussein said Iraq and the United States had reached understandings allowing oil exports to restart through the Strait of Hormuz, using a shipping lane near Oman. Underscoring the conflict's heavy economic cost, Hussein put Iraq's losses from the Iran war and disrupted oil exports at $60 billion.

Expectations that Democrats would press for a rapid end to the conflict drove last week's sharp decline in oil prices. Senior officials nevertheless remain sceptical. US Secretary of State Marco Rubio played down the prospect of an immediate breakthrough, calling Iran's current demands in the negotiations unacceptable.

WTI Oil: Key Questions

WTI Oil: Definition and Characteristics

Traded on international markets, WTI is a crude oil grade whose initials stand for West Texas Intermediate. Together with Brent and Dubai Crude, it forms one of the three main crude types. Its relatively low gravity earns it the description “light”, while its low sulphur content accounts for the term “sweet”. 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 by the media.

WTI Oil: Main Price Drivers

Supply and demand underpin WTI oil pricing, as they do for other assets. Stronger global growth can boost demand, whereas weaker growth can reduce it. Supply disruptions arising from political instability, war or sanctions can also affect prices. Another major influence is policy set by OPEC, the group of leading oil-producing countries. Because oil is traded predominantly in US Dollars, the currency's value matters too: a weaker US Dollar can make crude more affordable, while a stronger one can have the reverse effect.

WTI Oil: The Impact of Inventory Data

Weekly inventory releases from the American Petroleum Institute (API) and the Energy Information Agency (EIA) influence WTI oil prices by revealing shifts in supply and demand. Falling stocks can signal stronger demand and lift prices; rising stocks can point to increased supply and weigh on prices. The API publishes its figures each Tuesday, followed by the EIA the next day. The two sets of results generally align, differing by no more than 1% on 75% of occasions. As the EIA is a government agency, its figures are regarded as more reliable.

WTI Oil: OPEC's Pricing Influence

At meetings held twice a year, the 12 oil-producing nations in OPEC (Organization of the Petroleum Exporting Countries) jointly set production quotas for members. These decisions frequently affect WTI oil prices. A quota reduction can constrain supply and lift prices, while an increase in output has the reverse effect. The wider OPEC+ alliance adds ten non-OPEC members, with Russia the most prominent.