WTI crude oil futures are wrapping up a volatile week with the market trading at $62.99, down $2.22 or -3.40%. With one day left before the week ends, the primary driver of the choppy trade has been the reduction of the risk premium after reports on Thursday said the United States and Iran were talking.
Monday’s Plunge Sets the Tone
The week started with a sharp selloff on Monday after President Trump said over the weekend that Washington and Tehran were in discussions. The news caught the market off guard and triggered immediate profit-taking from traders who had been positioning for a potential supply disruption in the Middle East. Oil prices dropped more than 4% in the session as the geopolitical risk premium evaporated almost overnight.
The selloff was aggressive enough to push prices to their lowest level since January 20, forcing weak longs out of the market and resetting expectations about where oil should trade in a less hostile environment.
Wednesday’s Rally on Collapsing Talks
Just when traders thought the diplomatic path was clearing, Wednesday brought a complete reversal. A media report suggested that talks between the U.S. and Iran could collapse, reigniting fears of a wider confrontation in the region. The news came on the heels of rising tensions in the Strait of Hormuz, where the U.S. Navy shot down an Iranian drone earlier in the week.
That incident reminded the market why the risk premium existed in the first place. About…
WTI crude oil futures are wrapping up a volatile week with the market trading at $62.99, down $2.22 or -3.40%. With one day left before the week ends, the primary driver of the choppy trade has been the reduction of the risk premium after reports on Thursday said the United States and Iran were talking.
Monday’s Plunge Sets the Tone
The week started with a sharp selloff on Monday after President Trump said over the weekend that Washington and Tehran were in discussions. The news caught the market off guard and triggered immediate profit-taking from traders who had been positioning for a potential supply disruption in the Middle East. Oil prices dropped more than 4% in the session as the geopolitical risk premium evaporated almost overnight.
The selloff was aggressive enough to push prices to their lowest level since January 20, forcing weak longs out of the market and resetting expectations about where oil should trade in a less hostile environment.
Wednesday’s Rally on Collapsing Talks
Just when traders thought the diplomatic path was clearing, Wednesday brought a complete reversal. A media report suggested that talks between the U.S. and Iran could collapse, reigniting fears of a wider confrontation in the region. The news came on the heels of rising tensions in the Strait of Hormuz, where the U.S. Navy shot down an Iranian drone earlier in the week.
That incident reminded the market why the risk premium existed in the first place. About 20% of the world’s total oil consumption passes through the Strait of Hormuz. Any escalation that leads to a closure of that waterway would immediately impact shipments from OPEC members Saudi Arabia, the United Arab Emirates, Kuwait, and Iraq. Analysts quickly started throwing out numbers, with some suggesting oil prices could jump $10 to $20 higher if Iran shuts down the strait in retaliation for a U.S. strike.
Wednesday’s rally was sharp and swift, with buyers rushing back in to hedge against the possibility of a supply shock.
Thursday’s Pullback on Fresh Diplomatic News
Thursday brought the market full circle. Reuters reported that the United States and Iran had agreed to hold talks in Oman on Friday. The on-again, off-again nature of the diplomatic efforts triggered light profit-taking, but not enough to completely drive out buyers who are still hedging against a worst-case scenario.
Despite the pullback, some traders remain cautious. Reports continue to suggest that President Trump could still follow through on threats to strike Iran, which would likely trigger a much larger regional confrontation. That uncertainty is keeping a floor under prices even as the immediate risk premium fades.
EIA and API Reports Add to the Volatility
Beyond geopolitics, the market also had to digest inventory data from the American Petroleum Institute (API) and the Energy Information Administration (EIA). The EIA report showed a bigger-than-expected decline in crude oil inventories for the week, which provided support for prices mid-week. The report also showed a drop in distillates, while gasoline inventories rose.
The inventory draw was significant enough to remind traders that domestic fundamentals still matter, even when geopolitical headlines dominate the narrative. Tighter inventories helped limit the downside during Thursday’s selloff and kept the market from collapsing back to the lows seen on Monday.
U.S. Dollar Adds Pressure
The U.S. Dollar also played a role in the week’s price action. A stronger dollar makes oil more expensive for foreign buyers, which can dampen demand and weigh on prices. The dollar’s rise to a two-week high added another layer of pressure on crude oil, particularly during sessions when geopolitical concerns were fading.
Weekly Light Crude Oil Futures
Trend Indicator Analysis
The main trend is up, according to the weekly swing chart. The uptrend was reaffirmed the previous week when light crude oil futures crossed to the strong side of the 52-week moving average at $60.64 and took out the swing top at $65.62. However, this week saw an inside move, which suggests investor indecision and impending volatility. The market is also straddling a long-term 50% level at $63.62, which indicates a balanced or neutral market.
The main range is $75.12 to $54.70. Its retracement zone at $64.91 to $67.32 is resistance. It stopped the rally at $66.48 the week-ending January 30.
The new short-term range is $54.70 to $66.48. First support is its 50% level at $60.59. This forms a support cluster with the 52-week moving average at $60.64 to $60.59.
Buyers could show up on the initial test of $60.64 to $60.59. On the upside, a clean breakout over $67.32 will put $75.12 on the radar.
Weekly Technical Forecast
The direction of the weekly Light Crude Oil Futures market for the week-ending February 13 is likely to be determined by trader reaction to the 50% level at $63.62.
Bullish Scenario
A sustained move above $63.62 will signal the presence of buyers. This move will put the market in a position to challenge the retracement zone at $64.91 to $67.32. A breakout over $67.32 will indicate the buying is getting stronger. This could trigger an acceleration to the upside with $75.12 a potential near-term target.
Bearish Scenario
A sustained move below $63.62 will indicate active selling pressure. This could trigger a quick break into the support cluster at $60.64 to $60.59. Watch for a technical bounce on the first test of this area, but be prepared for the start of a breakdown under $60.29 with $54.70 a potential target.
What’s Next?
Looking ahead, the market is likely to remain choppy as long as U.S.-Iran talks continue. If negotiations extend beyond Friday, prices could weaken further. Traders will be watching closely to see if the talks produce any concrete agreement or if they collapse again, reigniting the risk premium.
Technically, the market is showing signs of fatigue after the volatile swings. The back-and-forth price action suggests traders are unsure whether to price in diplomacy or disruption. Until there’s clarity on the geopolitical front, expect two-way trade to continue. The bullish bias will continue as long as the market remains above the 52-week moving average at $60.64.
The bottom line is that oil is stuck between two narratives right now. On the one hand, diplomatic progress should reduce the risk premium and send prices lower. On the other hand, the threat of a strike on Iran and a potential closure of the Strait of Hormuz keeps a floor under the market.
In my opinion, gains are likely to remain capped as long as talks continue, but any signs of a breakdown could quickly send prices back toward the highs. The key is to watch the headlines closely and be ready for another week of volatility.
