WTI Crude Oil Soars Over 30% Before Settling Below 120.00

WTI Crude Oil Rockets Higher on Geopolitical Concerns

West Texas Intermediate (WTI) crude oil prices gapped higher at the start of the week, catapulting to levels unseen since July 2022. This surge, exceeding 30% at its peak, was primarily driven by heightened anxieties surrounding potential supply disruptions stemming from escalating conflict in the Middle East. The appointment of a new supreme leader in Iran further stoked these fears, contributing to the rapid ascent. The price action saw WTI briefly flirt with the $120.00 mark before retracing towards the $102.00 area.

Potential Retracement Levels

As WTI prices recede from their intraday highs, analysts are closely watching key support levels. A decisive break below the 200% Fibonacci retracement level at $103.97, followed by stabilization around $102.00, could pave the way for further declines. Subsequent support lies at $94.63, then $92.80, a level that represents a high from over two and a half years ago. Should the bearish momentum persist, the $88.87-$85.30 range provides additional support.

Technical Indicators Suggest Overbought Conditions

Technical indicators currently reflect the strong bullish momentum, but also signal potentially overextended conditions. The Relative Strength Index (RSI) has pushed deeply into overbought territory, while the Moving Average Convergence Divergence (MACD) continues to extend well above its zero line and signal line. This divergence suggests that the rally may be unsustainable in the short term.

Upside Potential Remains

Despite the potential for a pullback, further upside remains possible if buying pressure sustains above the 261.8% Fibonacci retracement level of the June-December 2025 downleg, positioned at $119.58. In such a scenario, WTI could retest resistance near the June 2023 highs around $123.70, followed by the March peaks in the $127.00-$130.00 zone. However, analysts caution that volatility is likely to remain elevated.

Market Outlook

Overall, WTI crude oil's six-day rally has propelled it towards multi-year highs. The current price action, characterized by aggressive swings between $98.00 and $120.00, suggests a possible pause in the advance. This could allow for a retracement towards the $90.00 region before the broader uptrend potentially resumes. Traders should closely monitor geopolitical developments and technical levels for further clues about the future direction of oil prices.