WTI drops more than 4% below $97 as profit-taking kicks in, Iran tensions limit losses

West Texas Intermediate (WTI) crude oil prices fell by 4.54% on Friday, trading close to $96.00 per barrel. The decline was primarily due to profit-taking following the crude oil's strong advance earlier in the week. This comes after a smaller-than-anticipated decline in U.S. crude inventories, which added further downward pressure on prices. Despite the drop, WTI remains higher for the week following an increase in the geopolitical risk premium linked to the ongoing conflict between the United States and Iran.

Friday's decline mainly reflected profit-taking as investors assessed the latest U.S. inventory data. The Energy Information Administration (EIA) reported that U.S. crude oil inventories fell by 391,000 barrels in the week ending September 4, down from a 4.45 million barrel decline in the previous week. Market expectations were higher, anticipating a drawdown of 1.6 million barrels. The modest inventory reduction indicates that supply and demand in the U.S. market are less tight than anticipated.

Geopolitical tensions in the Middle East continue to limit WTI's correction. U.S. President Donald Trump stated on Thursday that he is not seeking a deal with Iran and suggested that oil prices could remain elevated until after the U.S. midterm elections in November. Concerns about key shipping routes in the Middle East persist.

The Islamic Revolutionary Guard Corps (IRGC) fired upon a U.S.-owned drone in the Strait of Hormuz. Escalating tensions in the region could fuel worries about global oil supplies. Meanwhile, Yemen's Houthi rebels have captured the port city of Mocha, intensifying their control near the Bab al-Mandeb Strait, another critical route for global energy shipments.

These geopolitical risks keep a premium in oil prices, albeit not strong enough to offset profit-taking on Friday.

WTI is a type of crude oil traded on international markets, commonly known as West Texas Intermediate. It is considered a high-quality oil that is easily refined and is sourced in the United States via the Cushing hub, known as "The Pipeline Crossroads of the World." WTI is a benchmark for the oil market, and its price is frequently quoted in the media.

Global supply and demand, political instability, wars, sanctions, and decisions made by OPEC and OPEC+ are key drivers of WTI oil prices. The value of the U.S. dollar also influences WTI's price, as oil is primarily traded in U.S. dollars. Weekly inventory reports from the American Petroleum Institute (API) and the Energy Information Administration (EIA) impact WTI prices, with drops in inventories signaling increased demand and pushing up prices.