• WTI slips as Trump signals potential talks with Iran's president at the UN General Assembly this week.
• Qatari Prime Minister urges Gulf cooperation as messages pass between the US and Iran.
• Overnight drone and missile strikes hit Moscow and Riyadh, with residential, refinery, and airport areas targeted.

West Texas Intermediate (WTI) oil price continues its losing streak for the fourth successive day, trading around $93.60 per barrel during the Asian hours on Monday. Crude oil prices fell on growing hopes that increased diplomatic efforts could help end the Middle East conflict and restore stable energy flows from the region.

A significant factor behind this optimism is US President Donald Trump stating he would "probably" be open to meeting Iranian President Masoud Pezeshkian on the sidelines of the United Nations General Assembly in New York this week. Alongside this potential encounter, Trump may meet with other Persian Gulf leaders and is scheduled to hold a summit with Chinese President Xi Jinping.

Adding to the diplomatic momentum, Qatari Prime Minister Sheikh Mohammed bin Abdulrahman Al-Thani urged Gulf states to cooperate in restoring regional stability, noting that active messages are currently being exchanged between the US and Iran.

Reflecting these easing tensions on the ground, US Central Command chief Admiral Brad Cooper reported that oil and liquefied natural gas shipments through the Strait of Hormuz over the past two weeks have reached their highest level in six months.

However, the downside of oil prices could be restrained amid ongoing geopolitical tensions. Ukraine launched a massive overnight drone and missile assault targeting Moscow and its surrounding region, according to BBC reports. Russian officials confirmed intense air defense operations across the capital's vicinity, with Moscow Mayor Sergei Sobyanin stating that 450 drones were directed at the city, striking a major oil refinery and a residential building. Meanwhile, Yemen’s Houthis claimed responsibility for missile and drone strikes against "sensitive" locations in the Saudi capital of Riyadh, as reported by the Guardian on Saturday, following sightings of flames and heavy smoke near the city's main airport.

Oil pass-through seen limited as higher fuel costs squeeze margins

Economists at Royal Bank of Canada highlight that the recent rise in energy prices has not yet translated into a broad-based inflation surge. According to RBC, “evidence of pass-through to broader inflation has been limited so far,” and they “expect the impact in coming months will remain constrained as higher fuel costs erode margins across business supply chains before reaching final consumer prices.”

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.