The price of West Texas Intermediate (WTI) Oil rose following news about potential strikes on Iranian nuclear sites by Israel, fuelling concerns over Middle Eastern Oil supply. WTI continued its gains, trading at around $62.70 per barrel. A potential conflict might disrupt the oil flow through the Strait of Hormuz, affecting exports from Gulf countries such as Saudi Arabia and UAE.

The American Petroleum Institute reported an increase of 2.49 million barrels last week, contrary to an anticipated draw of 1.85 million barrels. The boost in US crude supply could impose limitations on price hikes. Kazakhstan’s oil production rose by 2% in May, defying OPEC+ quotas.

Factors Influencing WTI Oil

WTI Oil, a benchmark quality with low sulphur content, primarily sourced in the US, is heavily influenced by supply-demand dynamics, geopolitical tensions, OPEC decisions, and US Dollar value. Weekly inventory data from the API and EIA significantly affects oil prices, with lower inventories indicating higher demand.

OPEC’s production decisions play a major role in influencing WTI prices, with reduced quotas often leading to increased oil prices and vice versa. OPEC+ includes additional members such as Russia, further impacting production outcomes.

Given the recent upward movement in WTI pricing, we find ourselves in a period where geopolitical risk is applying upward pressure, particularly following reports of rising tensions between Israel and Iran. The market’s reaction was swift, with WTI climbing above $62.70 per barrel, clearly pricing in the possibility of disruption to supply routes critical to global Oil markets.

The Strait of Hormuz continues to represent a major chokepoint for energy exports, especially for producers like Saudi Arabia and the United Arab Emirates. Roughly a fifth of the world’s Oil supply transits through this narrow corridor, so even the suggestion of conflict understandably stokes fears around availability. For those operating in Oil-linked derivatives, this presents a heightened sensitivity to military developments, where even unofficial statements can sway prices rapidly.

Despite these pressures, the latest release from the American Petroleum Institute (API) suggests US inventories have gone up by 2.49 million barrels, pushing against the expectations of a 1.85 million barrel draw. This kind of surprise tends to mute excessive rallies, signalling to the market that short-term supply concerns might not be as dire as feared. In practical terms, it suggests traders should be cautious about overleveraging any single headline.

OPEC+ And Market Sensitivity

There’s also the matter of Kazakhstan, where production climbed by 2% in May, illustrating that adherence to OPEC+ agreements is not guaranteed. The effect of non-compliance by participating producers serves to add layers of uncertainty to the expected output picture. For us, it underlines why it’s necessary to look beyond quotas and examine actual barrels coming out of the ground.

It’s clear WTI remains sensitive to more than just Middle Eastern geopolitics. The price mechanisms are still deeply tied to things like the strength of the US Dollar and domestic production levels. A stronger Dollar typically makes commodities more expensive to holders of other currencies, potentially dampening demand abroad. Inventory reports, particularly from the EIA following API estimates, remain one of the more reliable short-term indicators we follow.

Supply behaviour from OPEC+ continues to weigh heavily on longer-term direction. While their meetings can spark volatility, what actually happens in regions like Russia and Iraq often carries more importance than the official communiqués. There’s a pattern now of quota slippage, and markets are noticing. We’re watching this divergence closely, especially in relation to countries that occasionally act in their own strategic interests regardless of production targets.

The short-term risk profile is therefore split. On the one hand, unexpected geopolitical developments are driving a speculative bid; on the other, inventory builds and excess production threaten to dampen any sustained upward move. From our perspective, it makes sense to be nimble, particularly around weekly data releases and any public communications from key producers or government officials. The opportunity lies in the dislocation between real-time supply signals and future contract pricing across the curve.

Create your live VT Markets account and start trading now.