West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $105.00 during the Asian trading hours on Monday. The WTI price climbs to its highest levels in nearly four years amid escalating conflict in the Middle East. Traders brace for the release of the American Petroleum Institute (API) report, which will be published later on Tuesday.
US President Donald Trump said on Sunday that the US will target Iran’s power plants and bridges on Tuesday if the Strait of Hormuz is not reopened. A spokesperson from Iran’s foreign ministry noted afterward that Iran will reciprocate attacks on its infrastructure and target similar infrastructure owned by the US or related to it.
The Strait of Hormuz, a critical chokepoint handling 20% of global oil, is effectively closed due to the US-Iran conflict. This creates an immediate physical supply shortage and boosts the WTI price.
The Organization of the Petroleum Exporting Countries and its allies (OPEC+) on Sunday decided to increase oil output by 206,000 barrels per day (bpd) in May. According to an OPEC+ statement, a rise that is largely symbolic, as some of its key members are unable to raise production due to the US-Israeli war on Iran. They are set to meet again on May 3 to make further decisions.
(This story was corrected on April 6 at 01:30 GMT to stated the correct abbreviation for barrels per day is bpd, not bps.)
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.
