• Trump administration considers easing sanctions on shadow fleet oil tankers, pulling prices lower.
• Escalating conflict in the Middle East and Ukrainian refinery strikes threaten global oil exports.
• API inventory data reveals a massive 11.12 million-barrel drawdown, far exceeding market expectations.

West Texas Intermediate (WTI) declines after five days of gains, trading around $93.10 per barrel during Asian hours on Thursday. Oil prices experienced a decline as the Trump administration considers easing sanctions on "shadow fleet" vessels.

A US official confirmed on Wednesday that the potential policy shift, aimed at lowering record-high global freight rates, targets tankers that have transported crude oil and petroleum products from sanctioned nations, including Russia, Iran, and Venezuela. These discussions follow US President Donald Trump's recent decision to temporarily lift sanctions on Russian diesel fuel, a move that sparked swift criticism from Ukrainian President Volodymyr Zelenskiy, European allies, and several Senate Republicans.

However, crude oil prices could quickly recover due to rising geopolitical hostilities across Eastern Europe and the Middle East that threaten global energy supply chains. In the Middle East, a container ship sank in the Strait of Hormuz on Wednesday following a projectile attack, while Iran-backed Houthi forces launched ongoing drone and missile strikes across Saudi Arabia. These intensifying attacks have prompted a growing number of oil tankers to avoid standard crude-loading zones, actively disrupting export logistics.

Meanwhile, Russia accused Ukraine of launching strikes against two domestic oil refineries, including the massive 400,000-barrel-per-day Ryazan plant, which Moscow claims violated an "energy ceasefire" recently brokered by President Trump.

Adding further upward pressure to the market, domestic supply figures showed a sharp drop in inventories. According to data from the American Petroleum Institute (API), US Weekly Crude Oil Stock plummeted by 11.12 million barrels for the week ending October 9. This significant drop far outpaced market forecasts of a 1.9 million-barrel build, marking the largest single-week draw since late January and following a 2.1 million-barrel draw from the prior week.

Analysts at MUFG/BTMU highlight that the market’s “consensus on the Middle East is that energy prices are unlikely to retrace and that the current status is likely to continue.” However, they caution that “the risks now seem more skewed to a worsening of the crisis,” noting that the Houthis “have shown no sign of letting up” and are now reported to have attacked “the Saudi Aramco headquarters in Dhahran and several other cities.” This, they suggest, reinforces expectations that elevated energy prices will persist amid ongoing regional tensions.

WTI Oil FAQs

WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.

Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly 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) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.

OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.