WTI traded in choppy fashion on Wednesday, hovering near its highest level since 24 July as Middle East tensions kept the risk premium in place. The contract was around $89.70 a barrel after touching $90.78. Iran’s Islamic Revolutionary Guard Corps said two oil tankers hit naval mines while attempting to transit the waterway, leaving the vessels disabled and crews forced to disembark after ignoring warnings.
Prices also took support from US inventory data. The EIA reported crude stocks fell by 4.45 million barrels versus expectations for a 1.1-million-barrel draw, reversing the prior week’s 95,000-barrel increase. Regional export flow estimates pointed to improving supply: Goldman Sachs put flows at roughly two-thirds of their pre-war 20 million barrels per day, while the US Energy Secretary cited average throughput of 8 million barrels a day via the Strait of Hormuz, with another 4 to 5 million routed through pipelines. Attention turns to an OPEC+ meeting on Sunday, with reports indicating October policy may be unchanged, while charts show resistance at $90-$92, RSI near 64, MACD positive, and ADX near 16.
Range-Bound Strategies Amid Geopolitical and Technical Resistance
We advise derivative traders to adopt a cautious, range-bound strategy as West Texas Intermediate (WTI) hovers near its six-week high of $89.70. While geopolitical tensions in the Middle East have pushed prices up, strong technical resistance between $90 and $92 suggests immediate gains will be capped. Given that the Average Directional Index (ADX) sits at a weak 16, we should avoid buying into the rally and instead prepare for consolidation.
We must closely monitor easing supply pressures, as reports show Persian Gulf oil exports have recovered to about 13.3 million barrels per day, or two-thirds of their pre-war levels. Furthermore, with 8 million barrels per day still transiting the Strait of Hormuz and up to 5 million bypassing it through pipelines, the threat of an immediate global supply crunch is shrinking. Traders can exploit this limited upside by selling out-of-the-money call options above the $92 resistance level.
Support, Inventory Drawdowns, and Neutral Options Positioning
On the downside, we expect solid support near the 100-day moving average of $85, especially after the latest US commercial crude inventories fell by a massive 4.45 million barrels. This drop far exceeded the market’s expected 1.1 million barrel draw, proving that physical demand remains highly resilient. With OPEC+ widely expected to hold its production targets steady at Sunday’s meeting, we recommend utilizing credit spreads to capture premium near this $85 floor.
Because geopolitical uncertainty keeps implied volatility elevated, option premiums are currently pricing in a significant risk premium. We suggest implementing neutral strategies, such as iron condors, focused on the $85 to $92 range to benefit from rapid time decay. This positioning allows us to collect premium from the market’s current choppy, sideways behavior while keeping defined risk limits in place.
