WTI Crude Oil Analysis: $103.80 Neckline Test & Geopolitical Risks
Market Overview
Another eventful week for WTI, with Friday delivering an interesting price sequence during the Asian session.
Oil initially pushed to a new high, experienced a pullback, and then resumed its upward movement, eventually closing around $103.
One detail caught my attention: Brent continued trading for approximately another hour after WTI had finished its session, adding almost another dollar. This is particularly interesting during the current daylight-saving transition period, when Europe and the United States are temporarily operating on different clock schedules.
The broader picture remains bullish, but the market is approaching an important technical decision point.
The potential Cup & Handle formation is still in play, although the latest price action has brought us back towards its neckline, currently around $103.80.
At the same time, the fundamental environment is becoming increasingly unpredictable. The situation around the Strait of Hormuz, the upcoming US midterm elections and the possibility of renewed military escalation involving Iran could all have a significant impact on oil prices.
The coming weekend could be particularly interesting.
Technical Analysis
D1 – Daily Chart
The daily chart continues to show a well-defined bullish structure.
Since the June lows around $70, WTI has established a sequence of higher highs and higher lows, moving within a rising channel.
The 200-day moving average (purple) continues to slope upwards and currently sits around $86.15. Price remains comfortably above it, supporting the broader bullish interpretation.
However, my attention is currently focused on the potential Cup & Handle formation.
The neckline is located around $103.80, which represents the upper boundary of the cup in my interpretation of the current structure.
The recent price action has brought WTI back towards this level after the initial breakout attempt.
Does this invalidate the formation?
Not necessarily.
A return towards the neckline can be a perfectly normal part of a breakout retest. What matters now is whether buyers can defend this area and push the market higher again.
For the bullish interpretation to remain convincing, I would like to see price reclaim and maintain levels above $103.80, ideally followed by another attempt at the recent highs.
A sustained move below the neckline would weaken the pattern, although it would not automatically invalidate the broader daily uptrend.
The next major resistance area is around $105.50–107, followed by a much larger supply zone above $109.
H4 – Four-Hour Chart
The H4 chart provides a much clearer picture of the current consolidation.
Friday's session produced a new local high around $104.50, followed by selling pressure. The last visible candle closed at $102.95, with a high of $104.50 and a low of $102.64.
This is an interesting reaction because the market has returned below the $103.80 neckline.
I would not interpret this as a confirmed bearish reversal yet.
The important question is whether this is simply a retest of the breakout area or the beginning of a deeper correction.
The $99.82 level is particularly important here. It represents the lower boundary of the current consolidation and a key short-term support.
As long as buyers manage to defend this area, the possibility of another bullish attempt remains valid.
Above $103.80, I would watch $104.50 first, followed by the $105.50–106.80 supply area.
On the downside, losing $99.82 would change the short-term picture considerably.
The next relevant area would be $96–97, marked as the broader Equilibrium zone on my chart.
Below that, we have another demand area around $92–93.
H1 – Short-Term Structure
The hourly timeframe will be important for identifying the next change in market behaviour.
I am particularly interested in whether buyers can establish a new higher low and reclaim the $103.80 area.
A bullish Change of Character followed by a break above $104.50 would provide additional confirmation that buyers are regaining control.
On the other hand, a failure to reclaim the neckline combined with a break below $99.82 would suggest that sellers are gaining momentum.
At this stage, I prefer to wait for confirmation rather than anticipate the next move.
Fundamentals & Geopolitical Developments
Technical analysis is only part of the story this week. The fundamental environment is becoming increasingly difficult to assess because several potentially opposing forces are affecting the oil market.
1. Strait of Hormuz – Another Tanker Attack
Friday brought another alarming development.
According to Reuters, a tanker in the Strait of Hormuz was struck by two limpet mines attached to its hull. The incident caused a fire in the engine room and temporarily disabled the vessel.
The crew was safe, the fire was extinguished and no environmental damage was reported. The vessel was able to continue towards its next port.
Responsibility for the attack has not been established.
This is nevertheless a significant escalation in the risks surrounding one of the world's most important oil transportation routes.
Even without a complete closure of the Strait, repeated attacks can increase insurance premiums, freight costs and the overall risk associated with transporting crude oil.
And ultimately, those costs find their way into the price of oil.
2. Trump, Iran and the November Midterms
This is probably the biggest geopolitical uncertainty heading into the weekend.
President Trump has indicated that the United States will not resume military strikes against Iran before the November 3 midterm elections.
However, this does not necessarily mean that military escalation is off the table.
The possibility of renewed action after the elections remains an important consideration, particularly given the continuing disagreements over Iran's nuclear programme and the security of shipping through the Strait of Hormuz.
At the same time, diplomatic efforts have not completely disappeared.
The market is therefore facing two very different potential scenarios: a diplomatic breakthrough that could reduce the geopolitical risk premium, or another military escalation that could send crude prices significantly higher.
For now, I would be very careful about treating either scenario as a certainty.
3. US Midterm Elections
The November 3 elections add another political dimension to the current situation.
The administration faces domestic political pressure, while the conflict with Iran continues to affect energy markets and international security.
The timing of any potential military escalation is therefore particularly sensitive.
Markets will be watching closely for any indication that Washington is moving towards negotiations or preparing for another phase of military action.
4. EIA – US Crude Inventories
The latest EIA report, released on October 28, delivered a mixed picture.
| Indicator | Weekly change |
|---|---|
| Crude oil inventories | -1.9M barrels |
| Gasoline inventories | +3.9M barrels |
| Distillate inventories | -1.5M barrels |
US commercial crude inventories declined to 410.6 million barrels, approximately 4% below the five-year average for this time of year.
Distillate inventories also declined and remain around 10% below their five-year seasonal average.
However, gasoline inventories increased by 3.9 million barrels, providing a counterbalance to the otherwise supportive inventory picture.
Overall, declining crude and diesel stocks provide some underlying support for prices, although the report is not unambiguously bullish.
Key Technical Levels
Based on the current D1 and H4 charts:
| Price | Significance |
|---|---|
| $117.80 | Major higher-timeframe resistance |
| $109–118 | Major supply zone |
| $105.50–106.80 | H4 supply / resistance |
| $104.50 | Recent local high |
| $103.80 | Potential Cup & Handle neckline |
| $102–103 | Immediate trading area |
| $99.82 | Important short-term support |
| $96–97 | Equilibrium zone |
| $95.60 | Previous weekly low reference |
| $92–93 | Demand zone |
| $86.15 | Daily SMA200 |
Outlook for Next Week
I see two primary scenarios.
Bullish scenario
The first thing I want to see is a successful reclaim of the $103.80 neckline.
If buyers manage to defend the current consolidation, establish a higher low and push above $104.50, the next objective would be another test of the $105.50–106.80 resistance area.
A sustained move above that zone would strengthen the broader bullish outlook.
The potential Cup & Handle formation would then need to be reassessed in the context of the breakout and subsequent price action.
Bearish scenario
If WTI fails to reclaim the $103.80 neckline and eventually loses the $99.82 support, I would expect increased selling pressure.
The next important area would be $96–97, followed by the stronger demand zone around $92–93.
Such a correction would weaken the immediate bullish structure, although it would not automatically invalidate the broader daily uptrend.
Final Thoughts
I remain cautiously bullish on the broader WTI structure, but I am not particularly interested in chasing the market at current levels.
The potential Cup & Handle formation is still interesting, but it is not confirmed. The neckline around $103.80 has become the most important short-term reference point.
A successful retest could provide the foundation for another upward move. Failure to reclaim it, on the other hand, could lead to a deeper correction.
And then there is the fundamental side of the equation.
With another tanker attack in the Strait of Hormuz, the US midterm elections approaching and the possibility of renewed military escalation involving Iran, the market could look very different when futures reopen on Sunday evening.
This is precisely the kind of environment where holding positions over the weekend carries additional risk. A geopolitical headline can easily produce a gap that no technical setup can protect you from.
As always, technical analysis is about probabilities, not certainties. Every pattern, support and resistance level can fail.
For now, $103.80 is the level I will be watching most closely. The next move could tell us a lot about whether buyers are still in control.
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