Western Texas Intermediate (WTI), the US crude oil benchmark, rose more than 3% on Monday amid continuing tensions in the Middle East as Iran launched attacks on the United Arab Emirates (UAE), while sources cited by CNN in Dubai said they expected attacks on Iran by the US and Israel in the next 24 hours. At the time of writing, WTI is trading at $102.55 per barrel after bouncing from a daily low of $96.45.
Oil rises due to UAE attack, supply disruption increases due to tension in Hormuz
UAE officials confirmed that a fire broke out at Fujairah petroleum facilities following an Iranian drone attack. The UAE Defense Ministry posted on Twitter that its forces intercepted three missiles, the fourth of which fell into the sea.
The UAE announced its exit from the Organization of the Petroleum Exporting Countries (OPEC), saying it will produce oil as needed for global markets without any restrictions while continuing to work with other producers.
Iran has targeted commercial and US military ships with cruise missiles, a US admiral said, adding that the US blockade of Iran has exceeded expectations. He said the US intercepted six Iranian small boats attempting to interfere with commercial shipping.
Iranian media claimed the regime targeted a US ship, but Axios, citing a US official, reported no attack. Meanwhile, President Donald Trump’s comments about Iran possibly resuming attacks if it “misbehaves” have cast doubt on the ceasefire.
Meanwhile, according to Iranian news agencies, Iran’s Revolutionary Guards Navy has revealed a map showing that they are expanding their control areas near the Strait of Hormuz, including the UAE ports of Fujairah and Khorfakkan as well as the coast of Umm Al Quwain.
Over the weekend, US President Trump announced ‘Operation Freedom’, aimed at freeing commercial ships in the Strait of Hormuz using the US Navy to accomplish that goal.
Meanwhile, South Korea reported a fire and explosion on a ship, while the United Arab Emirates accused Iran of launching a drone attack on an Abu Dhabi state oil company, ADNOC, ship in the Strait of Hormuz.
In terms of data, US factory orders increased 1.5% MoM in March, surpassing the expected 0.5% increase and up from 0.3% in February.
WTI Price Forecast: Technical Outlook
From a technical perspective, WTI is neutral to bullish, with buyers gaining momentum. The Relative Strength Index (RSI) is above its 50 neutral level in the bullish zone, aiming higher. Worth noting is that the price action over the past few days has been forming a ‘Bullish Engulfing’ chart pattern, which is a sign of further upside.
If WTI surpasses the day’s high of $103.86, expect a test of the $104.00 mark. Once crossed, the next area of interest will be the April 30 high at $107.35, followed by $108.00.
On the other hand, if traders push prices below the $100.00 milestone, oil could aim lower. If approval is received, the next area of interest will be the 50-day SMA at $89.65.
WTI Oil FAQs
WTI oil is a type of crude oil that is sold in international markets. WTI stands for West Texas Intermediate, which is one of three major types including Brent and Dubai crude. WTI is also called “light” and “sweet” due to its relatively low gravity and sulfur content, respectively. It is considered a high quality oil that can be easily refined. It is sourced in the United States and distributed through the Cushing Hub, considered the “Pipeline Crossroads of the World”. It is a benchmark for the oil market and the price of WTI is often quoted in the media.
Like all assets, supply and demand are the key drivers of the price of WTI oil. Thus, global growth can be a driver of rising demand and vice versa for weak global growth. Political instability, war and sanctions can disrupt supplies and impact prices. Decisions by OPEC, a group of major oil producing countries, are another major price driver. The value of the US dollar affects the price of WTI crude oil, as oil is primarily 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) influence the price of WTI oil. Changes in inventory reflect fluctuations in supply and demand. If the data shows a decline in inventories it could indicate increased demand, sending oil prices higher. Higher inventory may reflect increased supply, driving prices down. The API report is published every Tuesday and the EIA report the next day. Their results are generally similar, coming within 1% of each other 75% of the time. EIA data is considered more reliable because it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 oil producing countries that collectively set production quotas for member countries in twice-yearly meetings. Their decisions often impact WTI oil prices. When OPEC decides to reduce quotas, it could tighten supply, causing oil prices to rise. When OPEC increases production it has the opposite effect. OPEC+ refers to an expanded group that includes ten additional non-OPEC members, the most notable of which is Russia.
