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WTI sticks to modest gains above $92.00 amid Middle East jitters

Source Fxstreet

WTI kicks off the new week on a positive note as the geopolitical risk remains in play amid the US-Iran standoff.
Hopes that US-Iran peace talks would resume later this week hold back bulls from placing aggressive bets.
Fed hike bets and elevated US bond yields support the USD, which contributes to capping the black liquid.

West Texas Intermediate (WTI) – the benchmark US Crude Oil price – struggles to capitalize on a modest gap-up open on Monday as traders opt to wait for further developments surrounding the Middle East crisis before placing fresh bets. Nevertheless, the commodity retains its positive bias through the Asian session and currently trades just above the $92.00 mark, up over 0.80% for the day.

US President Donald Trump on Saturday rejected an Iranian proposal to reopen the Strait of Hormuz within a week and resume nuclear talks in return for the lifting of the US naval blockade of Iranian ports. Trump added on Sunday that additional military strikes on Iran were possible before the midterm elections in the US, prompting traders to price in the geopolitical risk premium. Adding to this, the Houthis in Yemen and Iran continued their attacks on Saudi Arabia, leaving regional supply flows vulnerable and lending additional support to crude oil prices.

Meanwhile, peace negotiators are pressing Iran to make concessions on its nuclear program to revive ceasefire talks with the US. Furthermore, Trump said that US negotiators are likely to engage in further talks with Iran this week, fueling hopes for a diplomatic resolution to end the Iran war that started in February. Apart from this, the underlying US Dollar (USD) bullish tone, bolstered by rising bets for a rate hike by the US Federal Reserve (Fed) in October and elevated US bond yields, contributes to keeping a lid on any meaningful upside for the commodity.

Adding to this, preliminary data from Kpler showed that crude oil exports from key Middle East producers rebounded in September to 12.8 million barrels per day, the highest since the Iran war started. This further makes it prudent to wait for strong follow-through buying around crude oil prices in order to confirm that the recent corrective pullback from the highest level since May 20, touched earlier this month, has run its course. Traders might also await the release of China's official PMIs on Wednesday before placing fresh directional bets around the black liquid.

WTI daily chart

Technical Analysis

WTI holds a bullish near-term bias above the 100-day Simple Moving Average (SMA) at $84.96. The advance is also supported by reclaimed Fibonacci levels, with prices trading above the 50.0% retracement at $84.44 and the 38.2% retracement at $88.59, suggesting underlying demand on dips while the market consolidates just below the upper retracement bands.

The next relevant hurdle emerges at the 23.6% retracement at $93.72, with a break above this level exposing the structural high zone at $102.01. On the downside, immediate support is located at the 38.2% Fibo. retracement at $88.59, ahead of the 100-day SMA at $84.96 and the deeper 50.0% retracement at $84.44, which together form a broad demand zone if a pullback develops.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

WTI Oil FAQs

What is WTI Oil?

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.

What factors drive the price of WTI Oil?

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.

How does inventory data impact the price of WTI Oil

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.

How does OPEC influence the price of WTI Oil?

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.

Disclaimer: For information purposes only. Past performance is not indicative of future results.

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