WTI slumps below $99.00 on profit-taking, US-Iran tensions in focus

West Texas Intermediate (WTI), the United States crude oil benchmark, is trading near $98.50 early in European trading hours on Friday. The drop in price comes as traders lock in profits benefiting from technical oversold conditions and a smaller-than-expected decrease in US crude inventories. WTI has surged over 10.25% this week, its highest level since May.

However, selling pressure emerges as markets become more cautious ahead of key US inflation data. Technical indicators suggest an overbought condition, indicating a possible temporary sell-off in the near term. US crude oil inventories declined modestly by 391,000 barrels last week, compared to the 4.45 million barrels drop in the previous week, which was lower than expected.

US President Donald Trump expressed no interest in reaching an agreement with Iran on Thursday, stating he did not anticipate oil prices falling until after the November midterm elections. Escalating attacks on critical shipping routes in the Middle East increase concerns of prolonged supply disruptions, which could potentially lift WTI prices.

Iran's Islamic Revolutionary Guard Corps (IRGC) claimed their navy intercepted a US "Saildrone-type" unmanned vessel in the Strait of Hormuz, preventing it from carrying out its mission. Yemen's Houthi rebels also seized the vital Red Sea city of Mocha, extending their control over the strategic Bab al-Mandeb strait, a significant global trade route.

Commodity strategists at TD Securities claim crude prices are rising due to persistent geopolitical tensions, noting, "crude rallies with seemingly no end to conflict in sight." They argue that further escalation and a preference for limited attacks and economic pressure over deal-making could continue to constrain supply, keeping the market's risk outlook tilted toward higher prices.

In the daily chart, WTI US Oil demonstrates a strong bullish bias, trading above the 100-day simple moving average and the Bollinger Bands' 20-day middle line, suggesting a solidly supported uptrend. The price is approaching the upper Bollinger Band, while the Relative Strength Index (14) at 70.53 indicates overbought conditions, hinting at strong but stretched upside momentum.

The immediate resistance level is the upper Bollinger band around $98.30, where sustained daily closes above this level could lead to further gains. On the downside, initial support is observed at the Bollinger 20-day middle band near $87.80, followed by the 100-day SMA at $85.35, with the lower Bollinger band at $77.30 acting as a deeper cushion if a sharper correction occurs.