Oil Pulls Back as Middle East Supply Risks Limit Losses

Oil prices moved lower on Wednesday (September 16) after the market was hit by an unexpected rise in U.S. crude inventories. Brent crude slipped around 0.86% to US$107.82 per barrel, while West Texas Intermediate (WTI) fell about 0.92% to US$104.86 per barrel. Despite the decline, both benchmarks remained at elevated levels following a strong rally in recent sessions driven by growing concerns over supply disruptions in the Middle East.

From a fundamental perspective, near-term pressure came from the American Petroleum Institute (API), which reported that U.S. crude inventories rose by 7.1 million barrels in the week ended September 11. The increase contrasted with market expectations for a decline of around 1.6 million barrels. Gasoline and distillate inventories also reportedly increased, raising concerns that U.S. domestic supply conditions may be looser than previously expected. The market will now turn its attention to the official inventory report from the Energy Information Administration (EIA).

However, the downside remains limited by global supply risks. Saudi Arabia has halted part of its oil shipments from the port of Yanbu following an attack on the East-West Pipeline, a key route used to divert roughly 4 million barrels per day of Saudi crude away from the Strait of Hormuz and toward the Red Sea. U.S. officials expect flows to resume within days, although some industry sources estimate that a full recovery could take five to six weeks. The disruption continues to keep the geopolitical risk premium elevated.

Oil sentiment is also being influenced by the Federal Reserve. Markets are pricing in a greater than 90% probability of a 25-basis-point rate hike, while the U.S. 10-year Treasury yield remains near 5% and the Dollar Index is hovering close to a two-week high. A stronger dollar can cap oil gains because crude is priced in U.S. currency, while higher interest rates may weigh on the demand outlook by slowing economic activity. Still, as long as Middle East supply disruptions persist, geopolitical risks are likely to remain the main source of support for prices.

From a technical perspective, WTI is still maintaining a bullish structure, although it is undergoing an intraday correction. Prices are trading around the US$105.10 pivot area, with the 14-period RSI near 58, while the MACD continues to show positive momentum. Immediate support is seen around US$104.80, followed by US$104.35–US$104.40. A break below these levels could expose the US$103 area. On the upside, resistance is located at US$105.50–US$105.85, followed by US$106.30. A clear breakout above those levels could reopen the path toward US$108.

Today’s oil market reflects a tug-of-war between rising U.S. inventories, which are weighing on prices, and Middle East supply risks, which continue to preserve the broader bullish trend. As long as WTI holds above the US$104 area and Brent remains above US$107, the current weakness can still be viewed as a correction within an upward trend. Volatility could increase sharply after the EIA inventory data and the FOMC decision, particularly if the dollar and Treasury yields rise further. On the other hand, any new disruption in Hormuz, Yanbu, or the Red Sea could quickly bring buyers back into the oil market.(mrv)

Source : Newsmaker.id