$99 breached: WTI Oil rallies as Middle East war threatens to grow more complex

1.9% rebound takes WTI Oil above $99.00 to session highs on Thursday.
Crude prices have gained as renewed attacks on Saudi oilfields fuel fears of a further escalation in the conflict.
Last week’s US crude stock draw far exceeded expectations, according to EIA figures released on Wednesday.

WTI Oil has gained about 1.9% so far on Thursday. The US benchmark, West Texas Intermediate, is trading above $99.00 as fresh Iranian threats against the US military and speculation over Israel’s possible return to the conflict renew supply concerns. The strong rebound in oil prices comes as the outlook for the Middle East conflict deteriorates.

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

Earlier on Thursday, the navy of the Iranian Islamic Revolutionary Guard Corps (IRGC) warned that US bases in the region could face attacks if Washington continued insisting that vessels cross the Strait of Hormuz using routes deemed illegal.

According to the IRGC, its forces also struck four vessels engaged in illegal oil transfers in the Persian Gulf. A further three vessels hit sea mines while trying to pass through the Hormuz sea corridor, it said.

Saudi oilfields face renewed threats

The remarks came after Yemeni Houthi militias, a close ally of Tehran, launched another drone attack on Aramco’s Shaybah Oilfield. The attack reportedly killed two people and revived fears of disruptions to Saudi oil supplies.

Adding to those concerns, The New York Times reported, citing US officials, that the US and Israel might be preparing another round of major airstrikes on Iran after the US mid-term elections. The aim would be to force Tehran to offer concessions in negotiations.

A 3.1 million-barrel decline in commercial oil inventories for the week ending 16 October provided further support for prices. The US Energy Information Administration (EIA) released the figures on Wednesday. The draw was substantially larger than the 800K barrels forecast by market analysts.

WTI Oil: Key Questions

WTI Oil: Definition and Characteristics

West Texas Intermediate, abbreviated to WTI, is a crude oil traded internationally. Alongside Brent and Dubai Crude, it is one of the three major types. Its relatively low gravity earns it the description “light”, while its low sulphur content makes it “sweet”. This high-quality oil is readily refined. Produced in the United States, WTI 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 primarily determine WTI Oil prices, as they do for 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 policy set by OPEC, the group of leading oil-producing countries. Because oil is traded mainly in US Dollars, movements in the currency also matter for WTI Crude Oil. A weaker US Dollar can make oil more affordable; a stronger currency can do the opposite.

Inventory Data: Effects on WTI Oil Prices

WTI Oil prices respond to weekly inventory releases from the American Petroleum Institute (API) and the Energy Information Agency (EIA). Inventory movements capture changes in supply and demand. Falling stocks may signal stronger demand and support oil prices. Rising inventories may indicate greater supply and weigh on prices. The API publishes its report each Tuesday, followed by the EIA the next day. The two sets of figures generally align: they are within 1% of each other 75% of the time. As the EIA is a government agency, its data is regarded as more reliable.

12 OPEC Nations: Their Influence on WTI Oil Prices

At meetings held twice a year, the 12 oil-producing members of OPEC (Organization of the Petroleum Exporting Countries) jointly set their production quotas. These decisions frequently affect WTI Oil prices. Cutting quotas can restrict supply and lift oil prices, while increasing output has the reverse effect. The broader OPEC+ grouping adds ten non-OPEC countries, most notably Russia.