Crude oil futures in the United States have extended their losing streak to five consecutive sessions, with prices now trading below the key $90 per barrel level during Asian market hours on September 23. The decline comes amid reports that Iranian Foreign Minister Abbas Araghchi and U.S. special envoy Steve Witkoff held a meeting on the sidelines of the 81st United Nations General Assembly in New York.
The face-to-face encounter between the two nations' representatives at the UN gathering signals a potentially constructive development for the long-stalled Middle East conflict. According to reports, an Iranian official has suggested that Tehran could reopen the Strait of Hormuz within seven days if the United States were to ease certain restrictive measures against the country. While these favorable indicators remain at the rumor stage and have not yet materialized into a substantive peace agreement, they have nonetheless exerted considerable pressure on crude markets.
WTI crude reached a cyclical peak of $102.08 per barrel on September 15, only to experience five consecutive days of losses since then. The primary driver behind this pullback is the prospect of improved U.S.-Iran relations and the potential reopening of the strategic waterway. Data from third-party sources shows that 15 vessels transited the Strait of Hormuz on September 22, up from 9 ships the previous day, though still at relatively depressed levels. Current shipping traffic data remains insufficient to justify a sustained and significant decline in crude prices.
However, reports of an explosion near Iran's Qeshm Island, possibly indicating fresh U.S. military action against Iranian targets, have cast a shadow over the likelihood of the strait reopening and hampered market confidence. With the Strait of Hormuz having been effectively blocked for an extended period, several Middle Eastern nations have pivoted to alternative routes for their oil exports. Saudi Arabia serves as a prime example, utilizing the Red Sea port of Yanbu alongside its Persian Gulf facilities. Sources indicate that Saudi Arabia's east-west pipeline is expected to resume operations this week, with oil loadings at Yanbu port anticipated to recommence shortly thereafter—a notably bearish signal for WTI.
U.S. Strategic Petroleum Reserve data from the week ending September 11 stood at 284.957 million barrels, down from the previous reading of 285.36 million barrels, continuing its steady decline. This weekly-updated inventory metric provides timely insight into shifting supply-demand dynamics. Since April, the SPR curve has never shown any bounce-back, even during the brief U.S.-Iran peace agreement period, indicating persistent energy security concerns within the United States. Despite periodic fluctuations in international crude prices, the underlying tight supply conditions have remained unchanged.
From a technical analysis perspective, WTI crude has formed cyclical highs on March 9, April 30, July 23, and September 15. Each rally peak has failed to produce sustained upward momentum, instead reversing lower and eventually establishing new lows over time. We believe the fundamental reason is that prices above $90 are not sustainable, sitting far above production costs of under $30 per barrel. Unless market risk aversion reaches extreme levels, it remains challenging to entice major capital to accumulate crude contracts at elevated prices.
Our overall outlook for WTI crude remains bearish, as the Middle East situation increasingly presents a lose-lose scenario that neither the United States nor Iran appears willing to prolong. The window for a potential breakthrough may arrive before the U.S. midterm elections in November. Should the administration relax sanctions on Iran, a new peace accord could be reached, potentially easing supply constraints significantly on the international crude market.
Risk disclosure: Markets carry risk, and investment requires caution. The content above represents only the analyst's personal views and does not constitute any operational advice. Please do not treat this report as the sole basis for decision-making. Analyst opinions may change over time without prior notification of updates.
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