WTI eases from three-month top and slips below $92.00; supply concerns to limit downside

West Texas Intermediate (WTI) – the benchmark US Crude Oil price – touches a fresh three-month top, around the $92.50 area during the Asian session on Wednesday, though it lacks follow-through. Nevertheless, the commodity seems poised to climb further amid escalating US-Iran tensions.

In the latest developments surrounding the Middle East crisis, the US attacked Iranian oil tankers in the Gulf of Oman and near Kharg Island. Iran responded by firing over 30 missiles at US forces stationed at the Al Azraq base in Jordan. Moreover, Iran’s Islamic Revolutionary Guard Corps (IRGC) warned that ships in Kuwaiti and Bahraini ports hosting US forces could also be targeted. This keeps the geopolitical risk premium in play, which should continue to act as a tailwind for crude oil prices.

Meanwhile, the continued military confrontations have weighed on shipping traffic through the Strait of Hormuz. Adding to this, Iran’s security chief, Mohsen Rezaei, said that Tehran is preparing to enforce a full blockade around the strategic waterway in response to economic sanctions. Moreover, Iran has threatened to retaliate against any new US attacks on its assets, warning that energy infrastructure across the Gulf was vulnerable, exacerbating fears of a prolonged disruption to oil supplies.

The aforementioned supportive fundamental backdrop validates the near-term positive outlook and suggests that the path of least resistance for the black liquid remains to the upside. Bulls, however, seem hesitant to place fresh bets and opt to wait for the release of US inflation figures for cues about the US Federal Reserve's (Fed) policy path. The outlook, in turn, will play a key role in influencing the US Dollar (USD) and provide some impetus to USD-denominated commodities, including crude oil prices.

WTI daily chart

Technical Analysis

WTI remains well above the 200-day Simple Moving Average (SMA) at $78.52 and is now looking to build on the momentum beyond the 61.8% Fibonacci retracement at $91.88. Momentum indicators stay constructive. In fact, the Relative Strength Index (14) near 66 hints at strong but not yet extreme buying pressure. Furthermore, the Moving Average Convergence Divergence (MACD) indicator is positive and above the zero line, suggesting sustained upside impetus.

Meanwhile, immediate resistance is not seen until the 78.6% Fibo. retracement at $98.69, followed by the cycle high at $107.36. On the downside, initial support aligns with the 50% retracement at $87.10 and the 38.2% level at $82.32. Below these, the 200-day SMA near $78.52 and the 23.6% retracement at $76.40 guard a deeper pullback toward the structural low at $66.84.