WTI crude oil outlook as odds of renewed US–Iran conflict increase

The WTI crude oil price jumped to $103.3 on Monday morning as investors bet that the US and Iran will go back to war. Brent, the global benchmark, rose to $111.27, its highest point since May 5. These gains may accelerate in the near term if the war resumes.

Donald Trump threatens Iran

The WTI and Brent crude oil benchmarks rose for the second consecutive day after President Donald Trump warned Iran that the time to reach a deal was running out.

With his trip to China done, and with the US having over 50,000 trips in the region, analysts now believe that Trump will be forced to launch another attack. 

His goal will be to force the Iranians to reach a deal that he believes is acceptable. This is what some of his close allies have recommended, with Mark Levin, going as far as asking him to use a nuclear weapon.

A resumption of war would have a major impact on the energy market. For one, Iran has warned that it has substantial cards on the table. It may intensify its attacks against oil infrastructure in the region, which would lead to shortages for months or years. 

Iran has also warned that it has the ability to disrupt flows through the Red Sea. It can do that directly or using the help of Ansah Allah, commonly known as Houthis.

All this is happening at a time when analysts are warning about the tumbling oil inventories. Data shows that global crude inventories are falling by over 4 million barrels a day, the fastest rate in years.

At the same time, there are concerns that some countries, especially in Asia and Africa may run out of oil in the coming days or weeks. 

The other main risk is that the Russian and Ukrainian war is continuing, with the latter targeting oil infrastructure. Ukraine launched over 500 drones in Russia during the weekend, with some hitting crucial oil refineries. Seaborne crude oil volumes dropped by 24% month-over-month in April, with Moscow lowering its total oil export forecasts to 237 million barrels.

Oil demand in the United States is expected to keep rising in the coming months as the driving season starts. 

Therefore, a combination of Russian disruption, US-Iran war, falling inventories, and the upcoming driving season means that WTI may continue rising in the near term. 

WTI crude oil price technical analysis

WTI crude oil chart | Source: TradingView

The daily chart shows that the WTI crude oil price has held steady in the past few days. It has remained above the 100-day moving average, and the ascending trendline that links the lowest levels since March.

The Relative Strength Index (RSI) has turned around and moved above the neutral point of 50. Other oscillators like the MACD and the Percentage Price Oscillator (PPO) have continued rising. 

Therefore, the most likely WTI forecast is bullish, with the next key target being at $110. The bullish outlook will become invalid if it drops below the 100-day moving average at $94.

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