WTI rebounds from recent lows as Middle East tensions sustain supply risks

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WTI bulls eye recovery toward $90

Diplomatic uncertainty limits further downside

The main factor behind the shift in oil market sentiment has been expectations of a diplomatic resolution to the conflict in the Middle East and a gradual recovery in regional supplies. On November 12, investors continue to assess the prospects for negotiations between the U.S. and Iran, which have yet to produce an agreement but have reduced the likelihood of an immediate escalation.

Meanwhile, oil production in the Middle East is gradually recovering, while the use of alternative export routes helps partially offset shipping restrictions through the Strait of Hormuz. According to EIA estimates, the volume of disrupted production in the region has declined from 10.9 million barrels per day at the peak of the crisis in May to approximately 2.5 million in October.

However, the situation remains unstable: risks of attacks on tankers, renewed disruptions to export infrastructure, and interruptions to shipments through strategically important maritime routes persist. Therefore, the decline in the geopolitical risk premium embedded in oil prices does not mean that threats to global supply have been completely eliminated.

U.S. crude inventories raise concerns over market balance

Additional pressure on prices comes from signs of rising U.S. crude oil inventories. According to preliminary data from the American Petroleum Institute, U.S. commercial crude oil inventories increased by approximately 9 million barrels in the week ended November 6, significantly exceeding market expectations. If official data confirm such a substantial increase, it would signal a weakening of the short-term supply-demand balance.

Meanwhile, the previous EIA report showed a decline in inventories of 0.9 million barrels to approximately 409.8 million, the lowest level for late October since 2014. Inventories at the key Cushing oil hub increased by 0.3 million barrels to 27.3 million, while distillate stocks fell by 3.6 million to 99.3 million barrels. Thus, despite signs of rising commercial crude inventories, supplies of certain petroleum products remain tight. The official EIA report will be released today, November 12, after a delay due to Veterans Day, and could significantly influence WTI's further direction.

Support at $84.50 could pave the way toward $90

The decline has significantly weakened the outlook for WTI, but the U.S. and Iran remain far from reaching a peace agreement, and Trump could still order new strikes against Iran. Therefore, as stated in WTI rebounds toward $88 as hopes for swift Iran deal fade, the recent lows around $84.50 could serve as a temporary base from which the bulls may attempt to push WTI prices toward $90.

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