Four tankers destroyed after striking mines near Strait of Hormuz, Iran’s IRGC says

Iran's Islamic Revolutionary Guard Corps (IRGC) reported the destruction of four oil tankers on Wednesday, saying they had struck naval mines while attempting to pass through a route described as prohibited south of the Strait of Hormuz, according to Reuters.

The tankers remained on fire, a statement said, while two other vessels had been seized.

WTI trades lower

A daily decline of 1.30% leaves West Texas Intermediate (WTI) trading at $94.55 at the time of writing.

WTI Oil Explained

WTI Oil serves as a global benchmark

Among the crude oils traded internationally, WTI, short for West Texas Intermediate, is one of three major grades alongside Brent and Dubai Crude. Its relatively low gravity and sulphur content earn it the descriptions “light” and “sweet”, respectively. Regarded as a high-quality oil, it is straightforward to refine. Produced in the United States, WTI is distributed through the Cushing hub, known as “The Pipeline Crossroads of the World”. Its role as an oil market benchmark means WTI prices are regularly cited in the media.

Supply and demand drive WTI Oil prices

The balance between supply and demand is the principal influence on WTI oil prices, as it is for all assets. Stronger global growth can lift demand, while weaker growth can have the reverse effect. On the supply side, political instability, wars and sanctions can cause disruption and affect prices. Decisions taken by OPEC, a group of major oil-producing countries, are another important price driver. WTI crude is also sensitive to the value of the US dollar because oil is largely traded in that currency. A weaker US dollar can therefore make oil more affordable, while a stronger dollar can have the opposite effect.

Weekly inventory figures influence WTI Oil prices

Published each week by the American Petroleum Institute (API) and the Energy Information Agency (EIA), oil inventory reports affect WTI prices by revealing shifts in supply and demand. A fall in stocks may signal stronger demand and push prices higher; an increase may indicate greater supply and weigh on prices. The API releases its report every Tuesday, followed by the EIA the next day. The two sets of figures tend to be similar, coming within 1% of one another 75% of the time. As the EIA is a government agency, its data is regarded as more reliable.

OPEC production decisions affect WTI Oil prices

At meetings held twice a year, the 12 oil-producing nations that form OPEC (Organization of the Petroleum Exporting Countries) jointly set production quotas for member countries. These decisions frequently influence WTI oil prices: lower quotas can restrict supply and lift prices, whereas an increase in OPEC production has the reverse effect. The broader OPEC+ grouping brings in ten additional countries outside OPEC, most notably Russia.

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