WTI slips below $91.00 despite rising US-Iran friction

WTI oil prices dropped below $91.00 per barrel despite heightened tensions between the United States and Iran. The decline occurred after WTI oil prices experienced slight increases the day prior, trading at approximately $90.80 per barrel during Asian hours on Thursday. The uncertainty surrounding the US-Iran diplomatic negotiations may prompt a potential rebound in crude oil prices.

Iranian President Masoud Pezeshkian spoke at the UN General Assembly, asserting Iran's determination not to comply with demands and asserting its right to utilize nuclear energy for economic growth. He also mentioned that Iran would continue to obstruct passage through the vital Strait of Hormuz as long as US sanctions and blockades persist.

In response to concerns over domestic energy, the US Energy Secretary, Chris Wright, disclosed that the Trump administration is working with domestic refiners to voluntarily reduce US diesel exports in an attempt to bypass a formal overseas shipment ban. On the other hand, geopolitical factors in the energy market continue to evolve, with Saudi Arabia preparing to resume oil exports through its crucial East-West pipeline, and Ukrainian President Volodymyr Zelenskyy reported recent discussions with President Donald Trump about a possible energy truce.

Despite the recent positive "deal headlines," TD Securities analysts remain skeptical until substantial progress is achieved. They caution that elevated speculative positioning in crude increases the likelihood of daily sentiment-driven fluctuations, rendering current price stability more susceptible to market sentiment rather than fundamental factors alone.

WTI oil, traded on international markets, is also known as West Texas Intermediate, one of three major types of crude oil, alongside Brent and Dubai Crude. It is characterized by its low gravity and sulfur content, making it an easy-to-refine high-quality oil. The WTI oil price serves as a benchmark for the oil market, frequently quoted in media coverage.

Like most assets, the WTI oil price is driven by supply and demand dynamics. Global economic growth, political instability, wars, and sanctions can influence supply and prices, while decisions made by OPEC, a coalition of significant oil-producing countries, also play a pivotal role. The value of the US Dollar affects WTI crude oil pricing, as oil is predominantly traded in US Dollars; a weaker Dollar makes oil more affordable, and vice versa.

Weekly oil inventory reports from the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact WTI oil prices; a decrease in inventories suggests increased demand, driving up oil prices, while higher inventories indicate increased supply, pushing prices down. The EIA data is generally considered more reliable, being a government agency, while OPEC's production quota decisions at twice-yearly meetings also have a substantial impact on WTI oil prices.