Iran's IRGC reports seven vessels hit, warns US of broader response

US bases in the region could face a response if Washington continues encouraging vessels to cross a mined waterway, the navy of Iran's Islamic Revolutionary Guard Corps (IRGC) warned, according to a Reuters report on Thursday.

Four vessels engaged in illegal oil transfers in the northern Persian Gulf were tracked by IRGC forces on Wednesday before being struck simultaneously and catching fire, the IRGC also said. Separately, the Iranian military reported that three more vessels had struck mines west of the Strait of Hormuz.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

How is the oil market reacting?

West Texas Intermediate (WTI) is trading at $99.10 at the time of writing, a gain of 1.54% on the day.

WTI Oil: Key Questions Answered

What distinguishes WTI Oil?

Traded internationally, WTI is a variety of crude oil whose name stands for West Texas Intermediate. Alongside Brent and Dubai Crude, it is one of the three major types. Its relatively low gravity and sulphur content earn it the descriptions “light” and “sweet”, respectively. These properties make it a high-quality oil that is easy to refine. Produced in the United States, WTI is distributed through the Cushing hub, known as “The Pipeline Crossroads of the World”. WTI serves as an oil-market benchmark, with its price regularly cited in media reports.

Why do WTI Oil prices change?

Supply and demand underpin WTI Oil prices, as they do those of other assets. Stronger global growth can lift demand, while weaker growth can have the reverse effect. On the supply side, political instability, wars and sanctions can cause disruptions that affect prices. Decisions by OPEC, a grouping of major oil-producing countries, are another important influence. Because oil is traded predominantly in US Dollars, the currency's value also matters for WTI Crude Oil prices: a weaker US Dollar can make oil more affordable, while a stronger one can make it less affordable.

Why do inventory figures matter for WTI Oil prices?

WTI Oil prices respond to the weekly oil inventory figures released by the American Petroleum Institute (API) and the Energy Information Agency (EIA), as stock movements reflect shifts in supply and demand. A decline in inventories can signal stronger demand and push oil prices higher. Conversely, a rise in stocks can point to greater supply and weigh on prices. The API releases its report each Tuesday, followed by the EIA the next day. The two sets of figures generally align, coming within 1% of one another 75% of the time. As the EIA is a government agency, its data is regarded as more reliable.

How do OPEC's decisions affect WTI Oil prices?

Production quotas agreed by OPEC often influence WTI Oil prices. The Organization of the Petroleum Exporting Countries brings together 12 oil-producing nations, which jointly set member countries' quotas at meetings held twice a year. Lower quotas can constrain supply and lift oil prices, whereas an increase in production has the reverse effect. The broader OPEC+ grouping adds ten non-OPEC members, with Russia the most prominent among them.