West Texas Intermediate (WTI) crude oil prices dropped 4.54% on Friday, trading around $96.00 at the time of writing, as investors engaged in heavy profit-taking following a strong advance earlier in the week [1]. The decline was further pressured by a smaller-than-expected reduction in US crude inventories; the Energy Information Administration (EIA) reported a decrease of 391,000 barrels for the week ending September 4, compared to a 4.45 million barrel draw in the previous week and market expectations for a 1.6 million barrel decline [1].
Despite Friday's pullback, WTI remained sharply higher for the week, supported by an increased geopolitical risk premium stemming from ongoing tensions between the United States and Iran [1]. US President Donald Trump stated on Thursday that he was not seeking a deal with Iran and suggested oil prices could remain elevated until after the US midterm elections in November [1].
Geopolitical risks continue to influence the market, with the Islamic Revolutionary Guard Corps (IRGC) reporting that its navy struck a US Saildrone-type unmanned vessel in the Strait of Hormuz, a strategic waterway for global oil shipments [1]. Additionally, Yemen's Houthis have seized the port city of Mocha, strengthening their presence near the Bab al-Mandeb Strait, another crucial route for energy shipments [1]. These developments maintain a geopolitical risk premium in oil prices, although it was not sufficient to offset profit-taking on Friday [1].
The modest decline in US inventories suggests that the supply-demand balance in the US market is less tight than anticipated, which, combined with profit-taking, contributed to the day's price drop [1]. However, the ongoing tensions in the Middle East and potential disruptions to key shipping routes remain significant factors that could impact oil prices moving forward [1].
CONCLUSION
WTI crude oil experienced a sharp decline due to profit-taking and a smaller-than-expected draw in US inventories, but ongoing geopolitical tensions in the Middle East continue to support prices. Market participants remain focused on developments in the region, which could influence future oil supply and price volatility.