Oil News: Truce Talk Pressures WTI and Brent as Hormuz Risk Persists

Crude Sold Off on Truce Talk but the Strait Is Still Not Open

November WTI crude oil futures and December Brent crude oil futures both finished near their session lows Friday after U.S.-Iran truce talk gave sellers a reason to press the market. The selling did not mean the Middle East supply risk disappeared. It meant traders were no longer willing to pay the same premium for it while negotiators explored a phased route out of the war. Iran said it would show no flexibility on its nuclear program even if the United States accepted its proposal to reopen the Strait of Hormuz. Headlines moved the price. The gap between the headlines and an actual agreement is still wide.

November WTI crude oil futures settled at $92.41, down $2.20 or -2.33%. December Brent crude oil futures settled at $97.44, down $2.78 or -2.77%.

Gasoline Fell 4% and the Diesel-Ban Talk Widened the Spread

U.S. gasoline futures fell about 4% Friday. That added pressure to crude because the products side of the trade was weakening at the same time traders were reassessing the war premium.

Ritterbusch and Associates said the market was also assessing a possible U.S. ban on diesel exports. The prospect of diesel staying in the domestic market would pressure refinery margins and could lead refiners to process less crude. The WTI discount to Brent widened to its highest level since May for a third straight day. The crude side is getting cheaper. The product side is getting more complicated. The diesel-ban conversation and the gasoline weakness hit Friday’s session from two directions.

Hormuz Traffic Fell to Nine Vessels Thursday

The Saudi supply threat kept crude from breaking sharply lower. Houthi attacks have disrupted Saudi oil flows. Saudi, Turkish, and Pakistani military chiefs were scheduled to discuss support for the kingdom. Saudi Aramco increased exports through Hormuz after drone attacks on the East-West Pipeline halted shipments from the Red Sea port of Yanbu earlier this month.

Kpler data showed 33.7 million barrels of crude moved out of Hormuz in the week beginning September 20. Nineteen tankers carried the barrels, including 17 VLCCs loaded mostly in Saudi Arabia and Iraq. The pace was broadly in line with the prior week.

The vessel count tells a different story. Commodity vessels transiting Hormuz fell to nine Thursday from 14 the day before. The 10-day average is 18. Before the war, the Strait typically handled about 125 large commercial vessels a day. Nine is not a functioning shipping lane. It is a military corridor moving barrels under escort.

Russia Added Another Supply Question on the Same Day

The United States proposed a trilateral meeting in the UAE with Ukraine and Russia to discuss ending that war. A credible agreement would add Russian energy exports to a market already trying to figure out how much oil is moving through Hormuz.

A drone attack temporarily suspended operations at Russia’s Novoshakhtinsk refinery on the same day. Russian energy infrastructure is still exposed. The market is not getting a cleaner supply picture from any direction. Traders are pricing a lower probability of a full Hormuz shutdown. They are not pricing normal conditions.

Daily November WTI Crude Oil Futures Technical Analysis

November WTI crude oil futures settled lower Friday with the minor trend down and sellers in control of the short term. The main trend is up according to the daily swing chart. A trade through the main top at $101.69 will signal a resumption of the uptrend. The main trend will change to down if the swing bottom at $78.55 fails to hold.

The minor trend is down. A trade through $98.01 will change the minor trend to up and shift momentum back to the upside. Friday’s decline kept November WTI crude oil futures below that trigger.

Retracement zone resistance is $95.18 to $96.72. Retracement zone support is $90.12 to $87.39. Additional support is a pair of 50% levels at $86.87 and $84.39.

The 50-day moving average at $84.76 provides both support and trend direction.

My bias remains to the upside because the main swing chart is trending higher. However, the possibility of a secondary lower top at $96.78 is weakening that outlook. Trader reaction to $95.18 to $96.72 is likely to set the tone early Monday.

Daily December Brent Crude Oil Futures Technical Analysis

December Brent crude oil futures settled lower on Friday, but the main trend is still up. A trade through $93.68 will change the main trend to down. A move through $104.71 will signal a resumption of the uptrend.

The minor trend is also up. A new minor top has formed at $102.39.

Retracement zone resistance is $99.20 to $101.50. Retracement zone support is $93.80 to $91.22.

Also providing support and trend direction is the 50-day moving average at $89.04.

My bias is to the upside because the main trend is up, however, a secondary lower top may be forming at $102.39, which would indicate the presence of sellers and weaken my outlook. Trader reaction to $99.20 to $101.50 is likely to set the tone early Monday.

What to Watch

The U.S.-Iran talks in New York either produce concrete steps toward reopening Hormuz or they become another round of headlines that fade by Monday. Iran’s nuclear position makes the gap between the two sides visible. Hormuz vessel traffic at nine against a pre-war average of 125 says the physical market has not priced the diplomacy the way crude has.

November WTI crude oil futures settled below $93.64. December Brent crude oil futures settled below $97.89. Sellers have the early advantage heading into Monday. November WTI crude oil futures need to reclaim the $95.18 to $96.72 retracement zone to shift momentum. A secondary lower top at $96.78 is the risk if the rally stalls inside that zone. December Brent crude oil futures need $99.20 before buyers have a case for $101.50 and the $104.71 main top. A secondary lower top at $102.39 is the same risk on that contract.

The WTI-Brent discount at its widest since May with gasoline down 4% on the session says the products market is adding to the crude pressure, not cushioning it.

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