WTI Oil extends gains above $94.50 as Trump rejects Hormuz reopening plan
- WTI Oil rallies nearly 3.5% on Monday to levels beyond $94.50 as another peace proposal is rejected.
- Trump said that Tehran's peace plan was not acceptable and threatened to resume bombings after midterm elections.
Oil appreciates firmly on Monday, following US President Donald Trump's refusal of Tehran’s latest proposal to cease hostilities and reopen the Strait of Hormuz. The US benchmark West Texas Intermediate (WTI) Oil barrel is trading at $94.60 at the time of writing, up nearly 3.5% on the day so far.
Is back to square one in the Middle East as Trump rejected a seven-day ceasefire proposal and vowed to resume attacks on Iran after the US midterm elections. Trump also said that the US was “winning tremendously” in the war and that “massive amounts of Oil” are passing through the key Strait of Hormuz.
Reports by the Kpler ship-tracking firm show that Oil traffic through Hormuz increased to 12.8 million barrels per day in September, the highest level since the war started on February 28. These figures, however, are far below the average of 20 million barrels per day crossing the waterway before the beginning of the war on February 28, and, obviously, not enough to ease concerns of a global supply shortage.
Iran claims complete control of Hormuz
Iranian foreign Minister, Abbas Araghchi said that the country is prepared for a “doomsday” war with the US, but he also said that his country is open to “real diplomacy.” Beyond that, A top Iranian military official said that Tehran has “complete control” of the Strait of Hormuz, and that they will “act decisively in the North of the Oman Sea and the east of the Strait of Hormuz and do not allow anyone to cross.”
Analysts at Deutsche Bank highlight that “even though US-Iran talks could resume this week, there was little sign of a breakthrough over the weekend and bond yields and oil have climbed again this morning.”
The bank notes that tensions remain elevated after “Iran reiterated on Sunday that it would not soften its conditions for reopening the Strait of Hormuz,” with Foreign Minister Abbas Araghchi insisting that Tehran would not back down from demands including “sanctions relief, access to frozen assets and an end to US blockade measures.”
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.