WTI Oil fluctuates near six-week high as Middle East tensions fuel volatility

WTI oil experienced fluctuations near a six-week high on Wednesday due to heightened tensions in the Middle East, which increased the geopolitical risk premium. The price of WTI oil reached $90.78 per barrel at its peak, surpassing the previous high of $90.70, observed on July 24.

The situation was further exacerbated by reports of Iran's Islamic Revolutionary Guard Corps (IRGC) striking two oil tankers with naval mines while they attempted to navigate through a restricted waterway. The tanker crews were forced to abandon ship after ignoring warnings against using this "illegal route."

Traders in the energy sector found solace in a larger-than-expected decline in US crude inventories; the Energy Information Administration (EIA) reported a drop of 4.45 million barrels, significantly surpassing the anticipated 1.1 million barrel draw. This decline contrasted the previous week's modest increase of 95,000 barrels, signaling a reversal of the upward trend.

Experts from Brown Brothers Harriman cautioned that the upward momentum in oil prices might be limited, as Persian Gulf oil exports have rebounded. They cited Goldman Sachs' estimates indicating that oil flows from the region have returned to approximately two-thirds of their pre-war level of 20 million barrels per day. This assessment aligns with the US Energy Secretary's viewpoint that about 8 million barrels a day pass through the Strait of Hormuz, while a range of 4 to 5 million barrels bypass it through pipelines.

The OPEC+ meeting scheduled for Sunday is anticipated to maintain its oil production policy unchanged for October, according to multiple sources familiar with the matter, as reported by Reuters. On the technical front, WTI oil maintains a bullish bias, staying above the 100-day and 200-day Simple Moving Averages (SMAs). However, the 100-day SMA, located at $85, provides a key support level.

A decisive break below this level could expose the broader support at the 200-day SMA, which is around $77. Conversely, a sustained break above $92 could potentially lead to a surge toward the $95 and $100 levels.