September WTI crude oil posted its strongest weekly gain in months, rallying over 11% as traders rapidly rebuilt a geopolitical risk premium into the market.
September WTI crude oil posted its strongest weekly gain in months, rallying over 11% as traders rapidly rebuilt a geopolitical risk premium into the market.
Renewed Middle East Fighting Drives Crude Oil News TodayThe biggest catalyst came over the weekend when fighting between U.S. and Iranian forces intensified.
Supply Risks Remain the Key Driver for Crude OilFor now, the crude oil market is being driven almost entirely by geopolitical developments.
We’re not going to turn totally bearish on crude oil unless the 52-week moving average at $67.98 fails to hold.
The biggest catalyst came over the weekend when fighting between U.S. and Iranian forces intensified. New U.S. airstrikes targeting military facilities near Iran's southern coast were followed by Iranian missile and drone attacks on U.S. positions in the region. The renewed conflict raised concerns that oil exports from the Persian Gulf could once again be disrupted. Iran also threatened to interfere with shipping routes, including the Strait of Hormuz and potentially the Red Sea through allied Houthi forces. Since roughly one-fifth of the world's seaborne crude oil moves through the Strait of Hormuz, traders quickly priced in the possibility of tighter global supplies.
September WTI crude oil posted its strongest weekly gain in months, rallying over 11% as traders rapidly rebuilt a geopolitical risk premium into the market. After opening the week near $72.50, prices climbed above $80 before easing slightly into Thursday's close. The move marked a dramatic reversal from the previous two weeks, when optimism over improving oil flows through the Strait of Hormuz had pressured prices lower. This week, renewed military action between the United States and Iran shifted the market's focus back to the risk of supply disruptions.
September WTI crude oil posted its strongest weekly gain in months, rallying over 11% as traders rapidly rebuilt a geopolitical risk premium into the market. After opening the week near $72.50, prices climbed above $80 before easing slightly into Thursday's close. The move marked a dramatic reversal from the previous two weeks, when optimism over improving oil flows through the Strait of Hormuz had pressured prices lower. This week, renewed military action between the United States and Iran shifted the market's focus back to the risk of supply disruptions.
Renewed Middle East Fighting Drives Crude Oil News Today
The biggest catalyst came over the weekend when fighting between U.S. and Iranian forces intensified. New U.S. airstrikes targeting military facilities near Iran's southern coast were followed by Iranian missile and drone attacks on U.S. positions in the region. The renewed conflict raised concerns that oil exports from the Persian Gulf could once again be disrupted. Iran also threatened to interfere with shipping routes, including the Strait of Hormuz and potentially the Red Sea through allied Houthi forces. Since roughly one-fifth of the world's seaborne crude oil moves through the Strait of Hormuz, traders quickly priced in the possibility of tighter global supplies.
U.S. Inventory Report Reinforces Oil Price Forecast
The market also received support from fresh U.S. inventory data. The Energy Information Administration reported that crude oil inventories fell by 1.7 million barrels last week, a larger draw than analysts expected. Gasoline inventories also declined, suggesting fuel demand remained steady during the peak summer driving season. Although distillate inventories increased and domestic crude production held near record levels, the inventory report reinforced the view that physical supplies remain relatively tight despite higher U.S. output.
Changing Trader Sentiment Supports Oil Price Projections
Earlier this month, traders had expected oil prices to remain under pressure as diplomatic efforts between Washington and Tehran appeared to improve and forecasts called for Middle East production to gradually recover. The renewed fighting completely changed that outlook. Instead of focusing on additional supply returning to the market, traders concentrated on the growing possibility that existing exports could once again be interrupted. The rapid shift in sentiment helped fuel aggressive short covering and fresh speculative buying throughout the week.
Weekly Light Crude Oil Futures
Trend Indicator Analysis
September WTI crude oil rebounded sharply this week after recapturing a critical retracement zone at $75.40 to $70.70, which is now new support along with the 52-week moving average at $67.98. Controlling it all is the main bottom at $67.12. A trade through this level will reaffirm the downtrend.
The new short-term range is $95.30 to $67.12. Its retracement zone at $81.21 to $84.53 is the next major upside objective. Trader reaction to this zone will determine the near-term direction of the market.
Since the main trend is down, I expect to see sellers return on a test of the zone. However, overtaking $84.53 will shift momentum to the upside and lead to a possible. Retest of minor resistance at $89.90 or the contract high at $95.30.
Weekly Technical Forecast
The direction of the Weekly September Crude Oil futures contract for the week ending July 24 is likely to be determined by trader reaction to the retracement zone at $81.21 to $84.53.
Bullish Scenario
A sustained move above $84.53 will signal the return of strong buyers, not just short-covering. This will put the market in a position to extend the gains into the minor top at $89.90. Overtake this level, and the buying gets a little more serious, with $95.30 the next objective.
Bearish Scenario
A sustained move under $81.21 will indicate the presence of sellers. This will signal that the short-covering rally is nearly over and that strong speculative buyers never really returned after the two-week technical bounce from the successful test of the 52-week moving average at $67.98. This move could put $75.40 to $70.70 back into play, along with the new support cluster at $67.98 to $67.12.
Neutral Scenario
If the short-covering persists but new buying is limited, then look for prices to range between $81.21 and $84.53. This arrangement would indicate that traders are waiting for a catalyst.
Supply Risks Remain the Key Driver for Crude Oil
For now, the crude oil market is being driven almost entirely by geopolitical developments. As long as military tensions remain elevated and uncertainty surrounds oil shipments from the Middle East, traders are likely to keep a sizable risk premium built into prices. Any signs that the conflict is easing could quickly remove part of that premium, but through Thursday evening, supply concerns remained the dominant force behind this week's sharp rally.
Technically, trader reaction to $81.21 to $84.53 will tell us whether short-covering or new buying is driving the price action. A sustained move over $84.53 will indicate that buyers are being aggressive and willing to take out offers.
A pullback under $81.21 could drop prices back to $75.40 to $70.70, but this won’t necessarily be bearish. It could mean that buyers would rather passively bid than actively take out offers. We’re not going to turn totally bearish on crude oil unless the 52-week moving average at $67.98 fails to hold.
