WTI Extends Rally to Third Session on Geopolitical Heat, But Storm Clouds of Supply Loom Over Market

Warren Takunda

Traders' Opinions

Summary:

WTI crude oil prices rose for a third day to near $64.20/bbl, supported by U.S.-Iran tensions.

BUY WTI

Close Time

CLOSED

64.302

Entry Price

66.000

63.000

65.246 +1.206 +1.88%

36.9

Pips

Profit

63.000

64.671

Exit Price

64.302

Entry Price

66.000

The crude oil complex is grinding higher in a tense, tactical rally, with West Texas Intermediate (WTI) futures pushing past $64.20 a barrel in early European trade. This marks a third consecutive session of gains, a climb fueled by the ever-present simmer of geopolitical risk in the world’s most critical oil choke point. Yet, beneath the surface of this bullish momentum, a powerful counter-narrative is building—one of swelling global supply and fragile diplomatic overtures that could cap the rally as swiftly as it began.

The immediate driver remains the fraught dance between Washington and Tehran. The market is digesting a classic case of conflicting signals that has traders on edge. Over the weekend, talks in Oman were cautiously labeled “positive,” suggesting a path away from escalation. Yet, in a move that underscored the profound distrust between the capitals, the U.S. Maritime Administration issued a fresh warning on Monday for American-flagged vessels to strictly avoid Iranian territorial waters in the Strait of Hormuz.

This is the quintessential oil market dilemma: the whisper of diplomacy versus the shout of military precaution. The Strait remains the jugular of global oil supply, and any direct confrontation there would send prices into the stratosphere. For now, the market is assigning a modest but persistent risk premium for that tail possibility. However, my sources indicate that veteran desks are treating this rally with skepticism. The Iranian stance on its nuclear program remains a non-negotiable red line for the White House, and until that logjam breaks, the “security premium” baked into prices feels fragile.

While geopolitics command the headlines, the fundamental picture is quietly shifting in a bearish direction. The most striking data point comes from Venezuela. According to Reuters shipping data, Caracas managed to export approximately 800,000 barrels per day (bpd) in January—a staggering jump from the 498,000 bpd recorded in December. This surge, facilitated by cautiously loosened U.S. sanctions amid political talks, represents a tangible new stream of medium-sour crude entering the market. It’s a stark reminder that beneath the OPEC+ production cuts, member nations are poised to ramp up output the moment constraints ease, potentially undermining the coalition’s price-supporting efforts.

Furthermore, the delicate balance of Russian oil flows is facing a new inflection point. All eyes are on New Delhi. India has been the linchpin of the Kremlin’s export strategy since the invasion of Ukraine, a voracious buyer of discounted Urals crude. Now, my reporting suggests that recent U.S.-India trade discussions have explicitly linked broader strategic cooperation to a freeze on Russian crude purchases. If Washington successfully leverages its diplomatic capital to stem this flow, it would force a significant volume of Russian oil to seek alternative, less efficient buyers, likely at a steeper discount. Paradoxically, while this would hurt Moscow, it could tighten the global balance and provide a floor for benchmark prices like Brent and WTI. The loss of such a massive, consistent buyer would be a seismic event for the physical market.

Today’s immediate focus, however, is closer to home. The American Petroleum Institute’s weekly stockpile data, due after the New York close, will provide the next pulse check on the health of the world’s largest oil consumer. The market is searching for confirmation that refinery demand is snapping back from winter maintenance and that product inventories are not ballooning. A larger-than-expected draw in crude stocks would likely amplify today’s geopolitical-driven gains. However, a significant build could be the trigger for profit-taking, highlighting the market’s lack of conviction.

Technical Analysis

From a technical perspective, WTI crude oil remains within a well-defined bullish trend, as seen on the 30-minute chart. The price is consolidating within an ascending triangle, which indicates that buyers are in control, pushing the market higher. The trendline support, marked by the rising lower boundary of the triangle, continues to provide a stable foundation, while the horizontal resistance near the $64.25 level suggests a potential breakout point.

The recent price action has shown increased volatility as oil prices approach the apex of the triangle. This points to a potential breakout either to the upside or downside. However, the structure suggests that an upward move is more likely given the underlying bullish trend. A decisive break above the horizontal resistance at $64.25, accompanied by strong volume, would confirm the breakout and likely drive prices towards the $65.00–$66.00 range, where the next significant resistance levels lie.

Should prices fail to break higher and instead fall back below the trendline support, a more cautious outlook would prevail. In such a scenario, a move below the $63.00 mark could lead to a retest of lower support levels at around $62.00 and $61.00. A sustained move beneath $61.00 would indicate a reversal in the current bullish bias and could expose further downside potential.

The Relative Strength Index (RSI) remains just above the 50 level, indicating neutral momentum with room for upside. This suggests that the market is not overbought, and there is potential for further price appreciation should the breakout occur. The Moving Average Convergence Divergence (MACD) is above the zero line but has flattened, signaling a reduction in bullish momentum. However, this does not yet signal a reversal, suggesting consolidation rather than exhaustion.

TRADE RECOMMENDATION

BUY WTI Crude Oil

ENTRY PRICE: 64.30

STOP LOSS: 63.00

TAKE PROFIT: 66.00

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WTI Extends Rally to Third Session on Geopolitical Heat, But Storm Clouds of Supply Loom Over Market

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