WTI gave back some of Monday’s gains, trading around $91.10 a barrel during European hours on Tuesday, as September exports from key Middle East producers rebounded. Kpler data cited by Reuters showed regional shipments rose to 16.328 million barrels a day, the highest since conflict flared between Iran and the US-Israeli alliance in late February, with Saudi Arabia and the United Arab Emirates driving the increase through higher output and exports.
Geopolitical risk remained in focus as negotiations between the US and Iran continued, centred on access through the Strait of Hormuz and potential sanctions relief tied to progress on a nuclear agreement. Iranian officials said they did not expect hostilities to be resolved, or the waterway to reopen, before US midterm elections in November, while Tehran awaited a US response to its latest proposal and further talks were scheduled to assess an amended version of its earlier offer. Scotiabank attributed recent price strength to renewed deterioration in US-Iran discussions following President Donald Trump’s rejection of Iran’s initial proposal.
Trading Strategies Amid Geopolitical Risks
We believe derivative traders should prepare for heightened volatility in WTI crude over the coming weeks as prices hover near the $91.00 mark. While the recent rebound in Middle East exports to 16.328 million barrels per day has temporarily eased supply tight spots, the underlying geopolitical risks remain incredibly high. We recommend utilizing options strategies, such as long straddles or bull call spreads, to position for sharp price swings ahead of the November US midterm elections.
Strait of Hormuz and Inventory Watch
Historically, threats to the Strait of Hormuz—through which about 20% of the world’s petroleum passes—have triggered rapid oil price spikes of 10% or more in a matter of days. With negotiations between the US and Iran stalling after the rejection of the latest proposals, any sudden escalation could quickly push WTI back toward the $100 level. We advise traders to avoid heavy short positions, as the risk of sudden, politically-driven supply disruptions far outweighs the current pressure from increased Saudi and UAE output.
Traders should also closely watch the weekly EIA inventory reports, especially as global crude stockpiles have recently trended below their five-year seasonal averages. If upcoming Wednesday reports reveal unexpected inventory draws alongside ongoing diplomatic friction, WTI could find immediate support and reverse its recent losses. We suggest focusing on short-dated call options to capture these quick, news-driven upside moves while limiting overall capital exposure.
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