West Texas Intermediate (WTI) declined on Thursday, trading around $101.45 at the time of writing, down 3.70% on the day after three consecutive days of gains. Despite this technical decline, US crude remains above the psychological level of $100, indicating that the market is still under pressure.
The corrective move comes in a context where geopolitical risks remain high. US President Donald Trump is exploring options to end the shutdown of the Strait of Hormuz, a strategic chokepoint for global energy transportation, according to the Associated Press. However, the proposed plan does not include lifting the US naval blockade of Iranian ports, but instead focuses on coordination with allies to increase pressure on Iran.
These developments are maintaining a strong risk premium in oil prices. The Strait of Hormuz is a vital corridor for Middle Eastern crude oil exports, and any prolonged disruption risks supply shortages to global markets.
Danske Bank analysts say tensions related to the Iran conflict are supporting energy prices. The bank highlights that markets remain skeptical about the rapid normalization of maritime traffic in the region.
In this environment, rising energy prices are weighing on broader market sentiment, adding to inflationary pressures and impacting dynamics in currency and equity markets. Even though today’s decline reflects profit-taking, the oil market balance remains dominated by geopolitical uncertainty and supply disruption risks.
WTI Oil FAQs
WTI oil is a type of crude oil that is sold in international markets. WTI stands for West Texas Intermediate, one of three major types of crude 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.
