WTI snaps five-day losing streak as US-Iran talks fall short of breakthrough

WTI rebounds on Wednesday after five straight days of losses.
US-Iran talks show some progress, but Strait of Hormuz traffic remains heavily restricted.
US crude inventories rise by more than expected in the latest EIA report.

West Texas Intermediate (WTI) Oil rebounds on Wednesday after five straight days of losses as traders assess the latest Middle East developments and US inventory data. At the time of writing, WTI trades around $92, up over 2.5% on the day, recovering from an intraday low of $88.27, its lowest level in more than two weeks.

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

US Secretary of State Marco Rubio said the meeting with Iran was “positive, but it was not a breakthrough.” He described the talks as “a continuation of previous discussions” and “largely an exchange of ideas and messages.”

Rubio's remarks follow indirect talks between US and Iranian officials on the sidelines of the United Nations General Assembly in New York on Tuesday. A senior Iranian official told Reuters on Wednesday that reopening the Strait of Hormuz and lifting the US blockade were discussed, adding that “many differences remain between the Iranian and US positions, but diplomacy continues.”

Saudi Arabia’s restart of its East-West pipeline has eased some supply concerns, but shipping through Hormuz is still severely restricted. Preliminary Kpler data showed three commodity vessels crossing on Tuesday, down from four on Monday and below the recent 10-day average of about 15, Reuters reported.

Against this backdrop, traders appear reluctant to push Oil much lower while supply disruptions continue to hang over the market, even as diplomatic talks resume.

Meanwhile, US crude inventories rose by 2.969 million barrels last week, according to the Energy Information Administration (EIA). Markets had expected a 0.7 million-barrel draw, following a 0.64 million-barrel decline the previous week.

WTI Oil FAQs

What is WTI Oil?

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.

What factors drive the price of WTI Oil?

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.

How does inventory data impact the price of WTI Oil

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.

How does OPEC influence the price of WTI Oil?

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.

Próximo artigo