WTI rose 0.70% on Monday to about $82.10-$82.13, as the market weighed stalled US-Iran contacts and the risk that oil flows through the Strait of Hormuz may not normalise soon. Fighting in Lebanon between Israel and Hezbollah, plus near-daily Ukrainian strikes on Russian refineries that have contributed to fuel shortages, added to supply-side uncertainty. Attention also turns to the American Petroleum Institute weekly crude inventory report due on Tuesday, while reports included a bulk carrier being hit while trying to leave Hormuz and Yemen’s main port suspending operations after Houthi missile attacks.
Banks pointed to tightening buffers and a firmer curve structure. Rabobank said Washington has leaned on the Strategic Petroleum Reserve, yet the SPR has fallen below 300 million barrels for the first time since it was filled in the 1980s, raising concerns over cavern integrity. Societe Generale said the forward curve has stayed largely in backwardation since February 28, only briefly moving into front-end contango, and added that oil and refined products now make up roughly 51% of the GSCI versus around 30% of the BCOM. Technically, WTI traded above $82.02, the 100-period SMA at $81.54 and the 200-period SMA at $78.99, with RSI at 62.8; resistance sat at $83.57 then $84.60, while support levels included $80.00 and $78.99.
Derivative Trading Recommendations and Technical Backdrop
We suggest derivative traders maintain a bullish stance on WTI as the contract comfortably holds above its key moving averages of $81.54 and $78.99. With the Relative Strength Index hovering near 62.8, there is still ample room for upward momentum before the market becomes overbought. We should look to buy near-term call options on shallow pullbacks toward the immediate support level of $82.02.
The severe supply threats in the Strait of Hormuz have pushed the oil forward curve into deep backwardation, meaning prompt prices are trading at a significant premium to future delivery months. To exploit this structural tightness, we recommend entering long calendar spreads by purchasing front-month contracts and selling deferred months. This strategy allows us to capture positive roll yield, which historically yields steady returns during periods of acute geopolitical stress.
Market Vulnerabilities and Volatility Strategies
Given that the U.S. Strategic Petroleum Reserve has plunged below 300 million barrels—its lowest level since 1983—the government’s ability to cool down future price spikes is severely limited. This supply vulnerability, combined with ongoing drone strikes on Russian refineries, is bound to trigger sharp volatility spikes in the coming weeks. Traders should utilize bull call spreads to cap premium costs while positioning for a potential breakout toward the key resistance level of $84.60.
Recent energy forecasts indicate that global oil demand is set to hit a record of over 106 million barrels per day in 2026, leaving very little margin for error as geopolitical tensions escalate. With OPEC’s spare capacity highly concentrated and the Strait of Hormuz handling over 20% of the world’s petroleum liquid consumption, any physical disruption could easily send prices past the $90 threshold. Consequently, we believe holding long-volatility positions and protective out-of-the-money calls is the most prudent path forward.
