Another couple of days of price velocity have been witnessed in WTI Crude Oil. Predictable whipsaw reactions being caused by unpredictable rhetoric from two key players: Iran and the U.S White House. Apparently negotiations are taking place between the two nations regarding the conflict in the Middle East and this has eased the mindsets of WTI Crude Oil participants who appear to have been made more comfortable the past handful of days. Speculators of the commodity now have to decide if the big selloff is an opportunity to ride momentum lower or if support based on dangerous past results the last few months will come back into vogue.
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High Open Interest Points to Possible Sudden Price Swings
Trading volume and open interest (open positions and active traders) in WTI Crude Oil has been high the past handful of months. Recent activity has produced another burst of significant price velocity per a reaction to the announced ‘rough framework’ from the Trump administration achieved this past weekend. Yesterday U.S Treasury Secretary Scott Bessent reportedly got into the act too and said an agreement looks possible.
WTI Crude Oil traders who received impetus early this week and shifted their stances to a more positive outlook were bolstered once again yesterday, and the commodity sold off in another burst. Day traders need to remain extremely careful. While the momentum downwards has been demonstrated widely, intraday reversals due to large volume in WTI Crude Oil can cause sudden reversals, particularly if open positions are being closed.
Middle East Tensions Remain a Source of Uncertainty
Market conditions in WTI Crude Oil are likely to remain fast. The commodity is trading below the $77.000 ratio as of this writing, a couple of hours ago WTI was below $75.00. And these quoted ratios should give pause to blind wagering in the commodity. When Crude Oil sank too low earlier this morning in the futures market it was hit by a sudden wave of buying. Swift waters remain a danger for speculators.
This dynamic price actions represents a complicated potential mix, one – some folks thought the commodity had been oversold, two – large short orders were closed, three – a combination of one and two may believe they should still remain slightly cautious given the track record of sudden turns in direction regarding past negotiations between the U.S and Iran. In other words things could get loud again. So while market conditions seem primed for potentially lower values, and yes, we have seen prices around in the first couple of weeks in July, we have also witnessed stark reminders that tensions remain high in the Middle East and nothing is assured.
Past Price Swings Highlight the Case for Hedging
Looking for further downside in WTI Crude Oil may be logical, but risk taking tactics must account for the potential that literally one loose cannon can ignite a firestorm in the Middle East. Thus, if a speculator wants to bet on the side of an optimistic outcome, they might also want to protect themselves with options braced for an opposite price reaction.
Large players in WTI Crude Oil who have decades of experience in the commodity are likely using hedging techniques to guard against sudden news developments that could turn negative. Having said that as a warning, from a technical standpoint the end of the third week in June and up to near end of the second week in July optimism was seen in WTI Crude Oil and prices below $74.000 were flourishing and challenging lower values.
A Reversal Higher Remains a Possibility
Will an agreement be announced today or tomorrow between the U.S and Iran? Quite possibly, but we should remember what happened in June and July, tranquil optimism turned into an escalation of military conflict. What are the chances of another turn of events, meaning thing do not go as wanted and one side isn’t happy about the working offer on the table? While it may be quite logical to believe prices in WTI Crude Oil should be lower, if circumstance turn negative an immediate reversal higher remains a consideration.
Optimism Continues Even as Hurdles Remain Possible
While it is human nature to want to believe in good outcomes and for a positive ending, WTI Crude Oil traders need to be realistic. The lower price seen in the commodity the past two days has certainly shown a flurry of selling power and it might remain sustained, particularly if an agreement is proclaimed today or tomorrow. However, traders should not bet on WTI Crude Oil without acknowledging the possibility negotiations could hit some hurdles and the price of the commodity turns choppy or higher.
WTI Crude Oil Short-Term Technical Outlook
Current Resistance: 76.900
Current Support: 76.050
High Target: 78.600
Low Target: 72.200
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