Amid elevated Middle East tensions, WTI Oil advances above $101.00

WTI Oil reclaims $101.00 as prospects for a Middle East peace agreement weaken.
According to Iran, the US is not serious about securing a peace agreement.
Reports indicate that a vessel is on fire in the Strait of Hormuz.

Renewed gains in oil on Tuesday are reversing part of the losses seen in recent days, with fading Middle East peace hopes supporting prices as attacks persist on vessels seeking passage through the Strait of Hormuz. West Texas Intermediate (WTI) Oil, the US benchmark, has moved back above $101.00 but is still substantially below Friday’s high of $103.28.

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

According to the Iranian Foreign Ministry, Tehran received negotiators from Saudi Arabia, Pakistan and Turkey on Monday for talks with Iranian authorities aimed at preventing tensions from escalating further.

Prospects for a near-term peace agreement nevertheless remain weak. Iranian authorities have accused the US of lacking seriousness about an agreement, even as the US and Israel stepped up their threats against the Islamic Republic.

Supply disruption concerns have also intensified following reports from the United Kingdom Maritime Trade Operations (UKTMO) of a vessel on fire in the Strait of Hormuz, about 63 nautical miles southeast of Iraq. Before the war, this passage carried about 20% of global crude production; it has now become a trap.

Adding to supply concerns, Yemen’s Iran-backed Houthi militias have continued to target airports and oil infrastructure in Saudi Arabia. Following Monday’s attack on Riyadh airport, Saudi's Civil Defense reported more drone attacks on Tuesday, after issuing emergency alerts in the eastern provinces earlier on Tuesday.

WTI Oil: Key Questions Answered

What defines WTI Oil?

Among the crude oil varieties traded internationally, WTI, short for West Texas Intermediate, is one of the three major types alongside Brent and Dubai Crude. Its relatively low gravity earns it the description “light”, while its low sulphur content accounts for the term “sweet”. Regarded as a high-quality oil, it can be refined easily. 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 coverage.

What determines WTI Oil prices?

Supply and demand underpin WTI Oil prices, as they do those of other assets. Stronger global growth can lift demand, whereas weaker growth can reduce it. Supply disruptions arising from political instability, wars or sanctions can also affect prices. Another important influence is OPEC, the group of major oil-producing countries whose decisions help shape prices. Since oil is traded predominantly in US Dollars, the currency’s value also matters for WTI Crude Oil: a weaker US Dollar can make oil more affordable, while a stronger one can have the reverse effect.

How do inventory figures affect WTI Oil prices?

WTI Oil prices respond to the weekly oil inventory releases from 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 lift oil prices; a build-up can point to greater supply and weigh on prices. Each Tuesday brings the API report, followed by the EIA release the next day. The two sets of figures generally align, with a difference of no more than 1% in 75% of cases. As the EIA is a government agency, its data is regarded as more reliable.

How do OPEC decisions shape WTI Oil prices?

At meetings held twice a year, the 12 oil-producing nations that make up OPEC (Organization of the Petroleum Exporting Countries) jointly set production quotas for member countries. These decisions frequently affect WTI Oil prices: reduced quotas can constrain supply and lift prices, while higher production has the reverse effect. The broader OPEC+ grouping brings in ten additional non-OPEC members, with Russia the most notable among them.