WTI rose 0.76% on Friday to about $83.30, rebounding from an intraday dip below $80.00. The move pared weekly losses and left prices set to end the week near opening levels after a bearish gap at the start. Shipping concerns through the Strait of Hormuz have been reassessed, and CommBank said tanker traffic has recovered to around 30%-35% of pre-conflict levels, a shift that has helped loosen immediate supply anxiety while volatility persists.
Geopolitical risk continues to underpin prices as tensions between Iran and the US keep a premium in place, alongside threats to energy infrastructure and key routes. US Energy Information Administration data showed a larger-than-expected fall in US crude inventories, adding to evidence of tight stocks. Attention now turns to this weekend’s OPEC+ meeting, where expectations centre on a September target increase of around 188,000 barrels per day, while execution is tied to Hormuz staying open and Gulf exporters restoring flows. TD Securities reported constraints via Hormuz, Bab el-Mandeb and Russia, with global seaborne exports near the lowest since the war began; it also flagged potential CTA buying of Brent above $91.60/bbl, while CTAs were described as selling RBOB gasoline on the day.
Trading Strategy Amidst Volatility
We advise derivative traders to prepare for heightened volatility in the coming weeks as West Texas Intermediate (WTI) stabilizes around the $83.30 level after recovering from its recent dip below $80. This sharp rebound shows strong buying interest at lower levels, meaning we should look to establish long positions on any short-term pullbacks. Recent data shows US commercial crude inventories fell by 3.4 million barrels last week, keeping domestic stocks about 4% below the five-year seasonal average and confirming a tight physical market.
We must closely monitor the upcoming OPEC+ meeting this weekend, where ministers are expected to discuss a modest production increase of 188,000 barrels per day for September. However, actually delivering this extra supply relies heavily on the Strait of Hormuz remaining clear, where oil tanker traffic is currently struggling at just 30% to 35% of its pre-conflict capacity. This persistent supply bottleneck means we should buy out-of-the-money call options to hedge against sudden price spikes if shipping disruptions worsen.
Opportunities in the Energy Complex
For those trading across the wider energy complex, we suggest watching Brent crude as it approaches $91.60, a key technical level that could trigger commodity trading advisors (CTAs) to become active buyers. At the same time, CTAs are net sellers of RBOB gasoline, presenting a great opportunity for us to short gasoline futures while remaining long on crude. Historically, tight global seaborne exports—which are currently sitting near their lowest levels since the European conflict began—highly favor these crude-over-product spread trades.
Geopolitical risk premiums will remain a major price driver, meaning we must keep protective stop-losses tight to manage sudden shifts in market sentiment. While ongoing US-Iran tensions support higher prices, any sudden diplomatic progress can quickly wipe out gains and send WTI back toward the $75 mark. We recommend using option straddles to profit from these sharp, unpredictable price swings without needing to guess the exact direction of the next geopolitical headline.
