WTI crude steadies near $85 as Middle East supply risks persist

WTI crude holds near $85 a barrel as Middle East supply disruptions keep the market's risk premium intact.

WTI crude steadied near $85 a barrel as Middle East supply disruptions kept a geopolitical risk premium in place, after a 7 percent slide on Washington's pause of strikes against Iran.

"The market is still pricing a supply shock that hasn't fully reversed," said Arslan, an energy analyst with an MPhil in behavioral finance who tracks investor positioning in crude.

WTI traded at $85.03 as of Aug. 2, holding above the $83.31 pivot that flipped from support to resistance after a decisive break, according to technical analysis. The 50-day EMA at $83.54 and the 100-day EMA at $81.82 now cap upside, with the relative strength index near 41 pointing to bearish momentum that has not reached oversold. Brent crude sat at $84.80, below its 23.6 percent Fibonacci retracement at $85.68, with a downtrend target of $82.00 and a swing low at $80.62. The Strait of Hormuz, which carries about 20 percent of world oil supply, still has traffic well below normal levels despite a partial reopening, and the International Energy Agency estimates global supply remains significantly below pre-war levels after a partial June recovery.

The balance is fragile. A break below $80.00 would strengthen selling pressure toward $78.27, while a reclaim of $83.31 would reverse bearish sentiment and target $84.80. With July PMI, JOLTS job openings, ADP employment and the unemployment rate due next week, plus any escalation in the Gulf, traders face a wide range — forecasts span $69.92 to $97.41 for the week of Aug. 3-9.

Supply Still Short of Pre-War Levels

The slow recovery of Persian Gulf exports continues to shape the market. A significant drawdown of strategic oil reserves cushioned the global shortage, leaving commercial inventories thin in several major consuming regions, according to the IEA. Demand has proved inelastic: some fuel switching from elevated prices and lower industrial offtake in Asia was offset by seasonal summer consumption and restocking demand. Natural gas faces similar constraints, with LNG disruptions from Qatar and the UAE tightening supplies and intensifying competition for Atlantic Basin cargoes between European and Asian buyers.

The supply-demand balance remains sensitive to any further disruption in the Gulf and to the pace at which Gulf output resumes. Pipeline bypasses around the Strait of Hormuz are limited, and Yemen's Houthi rebels continue to threaten shipping in the Red Sea, keeping alternative routes risky.

A 30-Day Range of $51.99 to $76.79

Over the next month, WTI is expected to trade within a range of $51.99 to $76.79, according to LiteFinance's forecast, with the average near $64.39. The path depends on the pace of Gulf transit normalization, the possibility of a Federal Reserve rate hike in September, and whether the U.S.-Iran pause holds. The last time oil broke above $90 in late July, it reversed sharply within days — a reminder that the risk premium can deflate as quickly as it builds. If Washington's pause becomes a durable truce and Gulf output recovers faster than expected, the downside scenario toward $69.92 and below comes into play; if the Strait of Hormuz remains constrained, the upside toward $97.41 stays live.

This article is for informational purposes only and does not constitute investment advice.