WTI Price Forecast: Eyes further losses near $88.50, two-week low amid easing supply risk

WTI – the American benchmark for crude oil – has taken a negative turn for the fifth consecutive day on Wednesday, dipping close to a two-week low observed on Tuesday. The commodity trades around the mid-$88.00 range during the Asian trading hours, declining by over 1% in the day and showing signs of further decline. Saudi Arabia is working towards reopening an oil pipeline along the Red Sea, with hopes of a diplomatic resolution to the US-Iran conflict and the reopening of the Strait of Hormuz easing concerns about supply constraints.

Iran reportedly proposed unblocking the crucial waterway in exchange for reduced US military intervention. This positive sentiment continues to weigh on oil prices. In the meantime, US President Donald Trump indicated during a United Nations General Assembly session that he faces a critical decision regarding whether to negotiate with Iran or obliterate the Islamic Republic if the conflict persists unresolved.

Additionally, stringent US sanctions targeting Iranian aviation are set to take effect on Wednesday, maintaining the geopolitical risk premium and restraining WTI's downside. From a technical standpoint, WTI trades near the 50.0% Fibonacci retracement level at $87.87, comfortably above the 100-day simple moving average (SMA) at $84.97.

This indicates a neutral to slightly constrained near-term outlook, although the prevailing uptrend remains intact. However, daily oscillators suggest weakening bullish momentum, as the Moving Average Convergence Divergence (MACD) falls deeper into negative territory, while the Relative Strength Index (RSI) at 46.8 has slipped below the midline.

Consequently, a breach of the 50% Fibonacci retracement would expose the first support at $87.87, followed by demand clusters around the 100-day SMA at $84.97 and the 61.8% Fibonacci level at $84.52. A more pronounced decline could expose WTI to the 78.6% level at $79.75 and the broader cycle floor near $73.67. On the upside, the initial resistance lies at the 38.2% Fibonacci retracement at $91.23, before a more formidable barrier at the 23.6% retracement near $95.37, with the long-term cycle high around $102.07 representing a more distant ceiling.

(The technical analysis of this report was facilitated by an AI tool. For further information, refer to the source.) WTI oil is a high-quality crude oil sourced from the United States, traded on international markets. It is also known as "light" and "sweet" due to its low gravity and sulfur content, respectively. As with all commodities, WTI's price is driven by supply and demand dynamics, with global growth, political instability, wars, sanctions, and OPEC decisions serving as key influencers.

The US Dollar's value also plays a significant role, as Oil is primarily traded in US Dollars; a weaker currency makes Oil more affordable, and vice versa. Weekly API and EIA inventory reports published every Tuesday and Wednesday, respectively, impact WTI's price. A decrease in inventories suggests increased demand, pushing up Oil prices, while higher inventories indicate increased supply, driving prices down.

The EIA's report is considered more reliable due to its government affiliation. OPEC, comprising 12 oil-exporting nations, collectively determines production quotas at biannual meetings, a decision that often influences WTI oil prices. When OPEC reduces quotas, supply tightens, pushing prices higher; increasing production has the opposite effect.

OPEC+ refers to the expanded group, including ten non-OPEC members, notably Russia. Haresh Menghani, a meticulous analyst with over a decade of experience in global financial markets, observes that AUD/USD is under pressure and approaching 0.7100 in the Asian session on Wednesday. The flash PMI for Australia reveals manufacturing contraction and slow service expansion, further fueling the pair's downside.

Additionally, a strong US Dollar acts as a headwind for the pair, as traders eagerly anticipate the upcoming Trump-Xi summit on Thursday. Meanwhile, markets disregard US-Iran indirect talks. USD/JPY hovers near mid-157.00s in the Asian session, hovering near two-week highs as Japan's Bank of Japan continues its dovish rate hike, weakening the Japanese Yen.

The US Dollar's firm stance adds support to the pair, though there are fears of Japanese intervention, limiting further gains. Markets are largely uninterested in the completion of the round of US-Iran indirect talks ahead of the Trump-Xi meeting. Gold has also faced fresh selling pressure, trading near $4,350 in Asia on Wednesday, as traders refrain from making new directional bets ahead of the highly anticipated US-China summit.

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