WTI climbs as Iran-Oman agreement details dampen optimism over Oil flows
- WTI rebounds toward $76.50 as traders assess the proposed Iran-Oman shipping framework.
- Tehran seeks greater control over ships entering and leaving the Gulf.
- Details of the plan raise doubts over a full recovery in Oil flows through the Strait.
West Texas Intermediate (WTI) Oil rebounds on Thursday as traders react to details of the proposed Iran-Oman agreement on the Strait of Hormuz. At the time of writing, WTI trades around $76.50 per barrel, up nearly 2.80% on the day.
Hopes for an agreement had pushed Oil prices lower earlier in the week, but the latest details suggest that a full recovery in Oil flows through the Strait is unlikely anytime soon, prompting traders to price some geopolitical risk back into the market.
According to Iran’s semi-official Fars News Agency, an Iranian parliamentary committee is reviewing a draft bill that would ban US, Israeli and other hostile vessels from passing through the Strait.
The bill proposes fines of up to 20% of a vessel’s cargo value for violations. Iran also says countries and individuals accused of causing damage to the country will not be granted passage until compensation is paid.
Fars also reported that the proposed Iran-Oman framework would direct ships entering the Strait through a northern route near Iran, while outgoing vessels would use a southern route near Oman.
The details highlight Iran’s push for greater control over the waterway. Tehran has repeatedly said that the Strait will not operate as it did before the war, while Washington insists on toll-free passage and maintains that Hormuz is an international waterway.
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.