WTI Oil flirts with the $85.00 level with markets economic D-Day sanctions on Iran
- WTI Oil prices drop more than 2% from last week's highs on Monday and test the $85.00 level.
- Investors are awaiting the details of a new package of US sanctions meant to cripple Iran's economy.
- Commerzbank Analysts warn that Oil prices will continue to grow unless inventories increase steadily.
Crude prices are trimming some of last week’s gains on Monday. The US benchmark West Texas Intermediate Oil is changing hands at $85.35, with investors awaiting details of a new package of US sanctions against Iran that might extend to Russia or China.
US Treasury Secretary Scot Bessent affirmed that the US prepares the “single greatest offensive ever marshalled against an adversary” in a Financial Times column on Sunday. Bessent is expected to hold a press conference later on Monday to lay out the actions to take in an “economic D-day” meant to isolate the Islamic Republic.
Tehran affirmed that China, Turkey and other countries will not cut their links with Iran and threatened to halt all Oil exports from the Gulf. Iranian authorities also warned that collaborating with the US will be considered an “act of war”, which raises risks of attacks on US allies in the Gulf region and also in Europe.
Commerzbank: Strait of Hormuz risks meet tightening inventories
Analysts at Commerzbank expect Oil dips to remain limited, with geopolitical risks keeping traders alert in the absence of major scheduled data releases, and Crude inventories shrinking. The bank's experts highlight that “on the oil market, diesel inventories are particularly tight.”
Against this backdrop, Commerzbank warns that “further drawdowns could push product prices even higher,” and cautions that “on the European gas market, prices would likely continue to rise even if inventory levels were to increase at a slower pace.” All in all, Analysts caution that “if stocks continue to decline ahead of the heating season – because the Middle East, as a major exporter, remains sidelined for an extended period and refinery throughput in Russia does not increase – product prices could rise even further.”
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.