Iran attacked the United Arab Emirates (UAE) with a barrage of missiles and drones after the United States (US) launched a major operation to wrest control of the Strait of Hormuz, Reuters reported on Monday.
The UAE said it had come under attack from Iran for the first time since the fragile ceasefire took hold in early April, as the Associated Press reported.
The UAE Defence Ministry stated that its air defences had engaged 15 missiles and four drones fired by Iran. Authorities in the eastern emirate of Fujairah said one drone sparked a fire at a key oil facility, wounding three Indian nationals.
Market reaction
Crude oil prices attract some buyers following the news headline. At the time of writing, the West Texas Intermediate (WTI) is up 2.40% on the day at $101.95.
(This story was corrected on May 5 at 00:30 GMT to say that the West Texas Intermediate (WTI) is up 2.40% on the day at $101.95, not go down)
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.
