West Texas Intermediate (WTI) crude oil rebounded on Thursday, snapping a three-day losing streak as traders turned to short covering following a sharp decline to a three-month low. The benchmark is currently trading around $71.50, marking a gain of more than 2% for the session as the market weighs geopolitical tensions against normalizing supply chains.
Key Takeaways
- WTI crude oil surged over 2% to trade at $71.50, recovering from recent multi-month lows.
- Geopolitical risks remain elevated in the Middle East, with ongoing reports of vessel interference and regional transit disputes in the Strait of Hormuz.
- EIA data revealed a weekly inventory draw of 6.088 million barrels, signaling persistent demand even as production flows begin to stabilize.
Market Sentiment and Geopolitical Tensions
Despite the intraday rally, oil prices are still hovering near levels last observed at the onset of the US-Iran conflict. While transit through the Strait of Hormuz has shown signs of gradual improvement, the environment remains highly volatile. Iran has asserted strict control over the waterway, mandating that vessels obtain approval from the Islamic Revolutionary Guard Corps (IRGC), with reports indicating that Iranian authorities have redirected ships attempting to utilize new southern transit routes.
Adding to the uncertainty, recent reports of a vessel being struck off the coast of Oman have reignited the geopolitical risk premium. However, US Secretary of State Marco Rubio has dismissed fears of formalized transit tolls, noting that there is essentially "zero support" among Gulf nations for such measures. According to analysts at TD Securities, while flows are normalizing, approximately 10-11 million barrels per day of Middle Eastern production remain offline, providing a potential catalyst for further price recovery if inventory draws continue.
Technical Outlook for WTI
From a technical perspective, WTI maintains a bearish near-term bias as it continues to trade below critical moving averages. The price remains capped by the 200-day Simple Moving Average (SMA) at $73.02 and is significantly below the 100-day SMA at $86.25.
Key indicators provide a mixed signal for traders:
- The Average Directional Index (ADX) is near 28, suggesting that the current market trend is gaining strength.
- The Relative Strength Index (RSI) is positioned at 32. While this indicates the asset is hovering just above oversold territory, it suggests that the aggressive pace of the recent sell-off may be starting to moderate.
Looking ahead, traders should monitor the $70.00 level as immediate support, with a deeper floor established near $65.00. On the upside, reclaiming the $73.02 resistance is essential for bulls, with subsequent hurdles located at $75.00 and $80.00 before a broader recovery can be confirmed.
