Trump Rejection Puts Hormuz Premium Back Into Crude
Crude oil opened the new week higher after President Trump rejected Iran’s proposal to end the conflict and reopen the Strait of Hormuz. Buyers came back at the open and lifted both contracts off Friday’s close, with WTI working back toward the 50% level on the weekly chart.
The selling that dominated last week was a bet that U.S.-Iran talks at the United Nations would produce a workable deal. That bet looks a lot weaker this morning.
At 04:30 GMT Monday, November West Texas Intermediate crude oil futures are trading at $93.78, up $1.34 or 1.45%. December Brent crude oil futures are trading at $98.69, up $1.07 or 1.10%.
Last week, November WTI crude oil futures settled at $92.44, down $3.03 or 3.17%. December Brent crude oil futures settled at $97.62, down $1.23 or 1.24%. WTI posted a high of $97.22 and a low of $88.67. Brent traded from $102.29 to $93.68.
Peace Talk Hopes Took the War Premium Out of WTI
WTI and Brent spent Friday pressing toward their lows of the week on truce talk. Iranian Foreign Minister Abbas Araghchi had said Tehran would reopen the Strait within seven days as long as the United States met the conditions in June’s interim peace memorandum, and sellers kept leaning on that.
That same memorandum fell apart when fighting resumed over transit rights through Hormuz. Iran’s latest proposal doesn’t say what would stop another disruption once ships are moving again.
Talks may go on, but there’s no deal and Iran has said it isn’t in a hurry. The market goes back to trading headlines out of Hormuz, Saudi infrastructure and the Houthis.
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Sellers have a real argument in the export data. Middle East exports from key producers rebounded to 12.8 million barrels per day in September. That’s the highest since the war began in February, and it’s more crude getting out than traders feared earlier in the month.
Saudi Arabia and the United Arab Emirates both increased exports. Hormuz shipments were set to reach about 7.4 million barrels per day for the month. Those are real barrels getting through.
Saudi Arabia shifted barrels toward Ras Tanura after attacks damaged the East-West Pipeline and restricted shipments from Yanbu. I wouldn’t call any of this normal. Houthi attacks on Saudi Arabia are ongoing and the Strait remains vulnerable.
Diesel Policy Could Keep WTI Under Pressure
WTI’s loss last week was more than double Brent’s. The U.S. contract underperformed as talk of a diesel export ban weighed on the refining outlook.
Traders know what a ban does to refinery margins and crude runs at home. WTI is taking that hit even if the measure tightens product supplies overseas.
Record diesel prices are keeping the policy risk alive. Watch how far WTI trades under the Brent benchmark this week.
Weekly November WTI Crude Oil Futures Technical Analysis
The main trend is up on the weekly swing chart. A trade through $101.69 will signal a resumption of the uptrend. The main trend will change to down if the main bottom at $67.09 fails to hold.
The minor trend is up. A trade through $78.55 will change the minor trend to down.
The first upside test is the 50% level at $95.18. Trader reaction to this level could set the tone this week. A sustained move over it will signal the presence of buyers. A sustained move under it will indicate the presence of sellers.
The first pivot price support is $90.12. The next potential support level is last week’s low at $88.67. This is followed by a second pivot level at $84.39.
The 52-week moving average at $71.82 is providing long-term support and trend direction.
My upside bias will grow stronger on a sustained move over $95.18, which could lead to an acceleration into the contract high at $101.69. A trade below $88.67 will weaken my bullish outlook.
Weekly December Brent Crude Oil Futures Technical Analysis
The main trend is up on the weekly swing chart. A trade through $104.71 will signal a resumption of the uptrend. A trade through $75.77 will change the main trend to down.
The minor trend is also up. A trade through $82.89 will change it to down and shift momentum to the downside.
The first resistance is a minor pivot at $99.20.
The first support zone is $93.80 to $91.23. The market tested the top of this zone last week when it dropped to $93.68. The second support zone is $87.86 to $83.88.
The major support and trend indicator is the 52-week moving average at $76.09.
My upside bias will strengthen if $99.20 is overcome with conviction. A failure to overcome $99.20 will put $93.68 back in play. My bullish outlook will weaken if $93.68 fails.
Weekly Outlook
Trump’s rejection gave buyers the opening, but it didn’t end the talks. Negotiations can resume at any time, so the bulls need to see the diplomatic trade fall apart before they chase crude higher. A move through last week’s highs in WTI and Brent would do it and turn the sell-off into a correction inside the larger uptrend.
Friday brings the employment report, and the core Personal Consumption Expenditures (PCE) index is out this week as well. Crude is going to react more to the next Hormuz headline than to either one. Sellers want another month of Gulf exports at September’s pace and some action from Washington on diesel exports.
The tone of the November WTI market this week will be determined by trader reaction to the 50% level at $95.18. The market opened below it, and if the early rally fades, the first pivot support at $90.12 is where buyers have to show up.
December Brent opened the week less than a dollar under the minor pivot at $99.20. It tested the top of the $93.80 to $91.23 support zone last week and bounced. The Brent trade this week runs through $99.20.
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