WTI rallies more than 5% as Middle East supply risks deepen
- WTI extends gains on Thursday as Middle East tensions threaten Oil supplies.
- Threats to shipping through the Strait of Hormuz and Bab el-Mandeb add a fresh geopolitical premium to Oil prices.
- The technical outlook stays bullish, although an overbought RSI warns that the rally may be stretched.
West Texas Intermediate (WTI) crude Oil rallies more than 5% on Thursday as rising tensions in the Middle East deepen supply risks. At the time of writing, WTI trades around $90.35 per barrel, its highest level since June 11.
The commodity has gained around 30% so far this month after tensions between the US and Iran flared up again. The latest rally gained momentum after Yemen’s Houthis said they attacked two Saudi Oil tankers near the Bab el-Mandeb Strait, adding a fresh geopolitical risk premium to Oil prices.
Tehran maintains that the Strait of Hormuz falls under its sovereignty. Iran’s Revolutionary Guards said the passage is “completely closed” while US military operations continue, warning that vessels would not be allowed to pass without coordinating with Iranian authorities.
Technical analysis:
On the daily chart, WTI US Oil maintains a bullish near-term bias as it holds above the 21-day, 50-day and 100-day Simple Moving Averages (SMAs), clustered between roughly $75.50 and $88.20.
The Moving Average Convergence Divergence (MACD) indicator stands firmly above zero with the line advancing, while the Relative Strength Index (RSI) at 71 has entered overbought territory, which suggests strong upside momentum but also hints that the rally could be stretched in the short term.
On the topside, initial resistance is seen at the horizontal barrier near $95.00, ahead of a higher cap around $105. On the downside, immediate support emerges at the 100-day SMA close to $88.20, followed by the 50-day SMA near $82.40 and the horizontal level at $80.00; deeper setbacks would expose the 21-day SMA around $75.52 before the more distant structural floor at $67.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
Recommended Articles
