WTI struggles below $87.50 as Democrats seek end to Iran war after midterm sweep
- WTI attracts some sellers for the second straight day amid hopes of an end to the Iran war.
- The US-Iran standoff over the Strait of Hormuz keeps the geopolitical risk premium in play.
- The prevailing USD selling bias could further support oil prices, warranting caution for bears.
West Texas Intermediate (WTI) – the benchmark US Crude Oil price – remains depressed for the second straight day on Thursday, trading just below mid-$87.00s during the Asian session and close to a near one-month low touched the previous day.
Democratic leaders vowed Wednesday to push for an end to the Iran war after sweeping US midterm election victories to gain control of both Chambers of Congress. Top Senate Democrat Chuck Schumer suggested that his party could use the control over government funding to press for that goal, prompting traders to price out the geopolitical risk premium and weighing on crude oil prices.
Meanwhile, the Strait of Hormuz remains a key concern for energy markets as disruptions to shipping could constrain global supplies. In fact, Iran said that the US response to its conditions for reopening the strategic waterway was unsatisfactory. Furthermore, another oil tanker was struck off the coast of Oman near the Strait of Hormuz, adding to concerns about the security of shipments in the region.
Furthermore, the prevailing selling bias surrounding the US Dollar (USD) could act as a tailwind for the USD-denominated commodity. Hence, it will be prudent to wait for strong follow-through selling before confirming that crude oil prices have topped out and positioning for an extension of the recent sharp retracement slide from the 104.00 mark, or the highest level since May, touched last Friday.
WTI daily chart
Technical Analysis
Crude Oil prices retain a constructive tone while above the 100-day Simple Moving Average (SMA) at $86.11 and the 50.0% Fibonacci retracement of the latest upswing at $85.59. The confluence support points to the underlying dip demand after the recent pullback from multi-month highs.
A break below this, however, would expose deeper supports at the 61.8% retracement at $81.27 and the 78.6% level at $75.12, with the prior swing low region at $67.29 acting as a more distant floor. On the topside, initial resistance is lined up at the 38.2% Fibo. retracement at $89.91, followed by the 23.6% level at $95.25 and then the recent cycle high region at $103.89.
(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.