WTI rose 3.20% on Monday to about $78.80, with prices supported by uncertainty over the Strait of Hormuz and wider Middle East tensions. Roughly 20% of global energy supply transits the waterway, keeping the market sensitive to disruption risk. Iran has set conditions for a full reopening, including an end to the US naval blockade, the withdrawal of US naval and air forces from around Iran, war-damage compensation, the lifting of sanctions and the release of frozen Iranian assets. Talks with Oman on a safe shipping route are reported to be progressing, but no full reopening has been agreed. Separately, Yemen\u2019s Houthis said they carried out a drone attack on a Saudi Aramco refinery in Jazan.<\/p>\n
TD Securities said trend-following CTAs have turned buyers across WTI, Brent and heating oil, while flows via Hormuz and Bab el-Mandeb were described as choked and Russian exports and refining as subdued due to Ukrainian attacks. ING reported that money managers cut net longs in NYMEX WTI by 7,257 lots to 101,050 lots, and reduced ICE Brent net longs by 20,361 lots to 164,722 lots, a second weekly decline. Baker Hughes data showed the US oil rig count rose by three to 454, the highest since May 2025, as crude exports stayed elevated. In one-hour trading, WTI was at $78.69, above the 100-hour SMA at about $76.24, below the 200-hour SMA near $78.77, with RSI around 64.<\/p>\n
We are seeing West Texas Intermediate (WTI) crude surge over 3% to trade near $78.80 as negotiations over the Strait of Hormuz hit a roadblock. With Iran demanding war compensation and an end to the US naval blockade before reopening this vital passage, about 20% of the world’s oil supply remains at risk. We believe derivative traders must prepare for extended volatility in the coming weeks as these high-stakes diplomatic talks drag on.<\/p>\n
Given this sudden spike in geopolitical risk, we expect the Cboe Crude Oil Volatility Index (OVX) to climb back toward its historical crisis averages of 40 to 50 points. To navigate this environment, we suggest derivative traders utilize bullish call spreads to capture upside potential while limiting premium costs. This strategy helps mitigate the risk of a sudden premium collapse if Oman-mediated shipping route talks unexpectedly succeed.<\/p>\n
Trend-following Commodity Trading Advisors (CTAs) have aggressively flipped back to the buy side, adding long positions in both WTI and Brent. However, recent CFTC data shows that money managers had actually reduced their net-long positions in NYMEX WTI to 101,050 contracts just before this latest spike. We advise traders to watch these conflicting flows closely and avoid over-leveraging, as sudden shifts in CTA momentum can trigger sharp, unexpected reversals.<\/p>\n
We also need to keep an eye on rising US production, where the active oil rig count recently reached 454, its highest level since mid-2025. While short-term supply is tight, this growing American output could cap longer-term gains if local inventories continue to be drawn down to meet global export demand. For those trading longer-dated options, we recommend utilizing put options to hedge against a potential supply-driven price correction later this autumn.<\/p>\n
On the hourly charts, WTI is currently testing heavy resistance near the 200-hour moving average of $78.77 and a downward trendline at $79.03. We recommend waiting for a sustained hourly close above $79.10 to confirm a bullish breakout before entering new long futures contracts. Conversely, if the price fails at this barrier, we could see a quick retreat toward the 100-hour moving average support near $76.24.<\/p>\n\n\n\n