The WTI crude oil price ended last week at $76.55, up slightly from this week’s low of $73. This rally continued during the weekend on popular perpetual futures market platforms like Hyperliquid and Aster. It rose to $78, its highest point since June 17 this year.
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Iran Closes the Strait of Hormuz
The WTI crude oil price dropped sharply last week, reaching its lowest point in months, after the US reached a deal with Iran. President Donald Trump and his Iranian counterpart signed it late last week, a move that started a 60-day negotiation period on Iran’s nuclear program.
The deal also ended the US blockade against Iranian ports, allowing the country to ship millions of barrels of oil at market price globally. It will lead to higher oil supplies and possibly lower prices over time.
The challenge, however, is that the deal included a ceasefire in Lebanon, where Israel and Hezbollah have been fighting for months. Israel and Hezbollah were not involved in these talks, and as such, they continued fighting during the weekend.
Iran decided to close the Strait of Hormuz on Saturday after Israeli attacks killed tens of people in Lebanon. As a result, this closure will likely affect the supply that market participants were expecting.
All this is happening at a time when crude oil inventories are in a strong downward trend. Data released by the Energy Information Agency (EIA) showed that inventories in the US dropped by over 2 million barrels in the previous week.
These numbers have been in a strong downward trend in the past few months as the war has continued. Similarly, US strategic petroleum reserves have plunged to the lowest level in over 40 years, a trend that may worsen in the coming weeks if the Strait of Hormuz remains closed for longer.
Also, there are concerns about Russian oil supplies after Ukraine launched major drone attacks targeting key refineries in the country. Indeed, recent news is that Russia has started to import gasoline by sea amid supply shortages.
WTI Crude Oil Price Technical Analysis
The weekly chart shows that the WTI oil price has slumped in the past few months, moving from $120 to a low of $72.73. It then started rising, reaching a high of $77 on Polymarket.
It has crashed below the 50-week Exponential Moving Average (EMA), a sign that bears are prevailing. It also retreated below the 61.8% Fibonacci Retracement level and is along the Strong, Pivot, Reverse level of the Murrey Math Lines tool.
Therefore, the most likely scenario is where the WTI benchmark rises temporarily in the near term and then resumes the downtrend as Iran reopens the Strait of Hormuz. It may rise to $80 and then falls afterwards.
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