WTI Oil Rallies 1% and Eyes Break of Key Confluence Level. Could a Rally to $70/Barrel Finally Materialize?

[Ben Graham]

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Oil prices have rallied just over 1% to start the week thanks in part to rising geopolitical risks with Russia-Ukraine tensions stoking supply concerns.

Russia-Ukraine Developments

Ukraine has recently used drones to attack and shut down many of Russia's oil processing plants. These attacks have stopped Russia from processing over a million barrels of oil each day, which is a significant part of their total supply (about 17%).

Ukraine's President, Volodymyr Zelenskiy, has said they plan to launch more of these attacks deep inside Russia.

This is happening three and a half years into the war. In the last few weeks, both sides have increased their air strikes. While Russia has been attacking Ukraine's power and transport systems, Ukraine is hitting back by targeting Russia's oil industry.

These ongoing attacks on energy infrastructure have increased the risk premium and this is likely aiding oil prices at present. A potential peace deal touted by US President Donald Trump appears to be falling apart with European Leaders taking a more combative approach following a historic meeting at the White House in August.

Many had expected the meeting to lead to a path for peace, for now though, this seems further away than ever.

Chevron Returns to Venezuela

The US government, under the Trump administration, has slightly changed its rules for Venezuela's oil industry. It gave the oil company Chevron special permission to increase its work there. This is a careful change, not a wide-open door, but it might allow other foreign oil companies to return to Venezuela in the future.

At the same time, the US is using a two-part strategy. While it's allowing more oil to be produced, it is also increasing pressure on Venezuela's President, Nicolás Maduro. As part of this, the US recently sent three navy warships to waters near Venezuela to help fight drug trafficking. The government had also previously charged Maduro with drug-related terrorism and offered a $50 million reward for his arrest.

For Chevron, this special permission is a big deal. The company could produce about 250,000 more barrels of oil per day. While that's not enough to change global oil prices, it's a significant boost for Chevron itself, increasing its oil production by more than 10%. Chevron's refineries in the US are now in a great position to process this cheaper Venezuelan oil, which they haven't been able to get for years.

The decision may offset some of the fears around Russian Oil supply and could be seen as a move in anticipation of supply constraints if the US follows through on harsher restrictions on Russian Oil purchases.

However, this is unlikely to affect demand for Russian Crude. China and India are the biggest buyers of crude oil from Russia. India has already seen additional tariffs imposed as a result of a its Russian Oil purchases but has remained steadfast thus far.

This was evident by Narendra Modi attending the SCO (Shanghai Cooperation Organization) meeting in Tianjin over the weekend where he was pictured alongside China Leader Xi Jinping and Russian Leader Vladimir Putin.

OPEC 8 Meeting

Markets will now turn their attention to API and EIA data this week ahead of the much anticipated meeting by the OPEC 8 scheduled for September 7.

OPEC meetings this year have been fruitful with significant output increases. The recent meeting on August 3 saw a 547,000 bpd increase for September, fully reversing the group's previous voluntary output cuts.

The group does appear to have pivoted its strategy to counter US President Donald Trump's pledge to lower oil prices. They have shifted from price stabilization to market share as Oil prices struggle to break back above the $70/ barrel mark.

The lower Oil prices go the more beneficial this may prove to OPEC members as US producers need Oil to average around the $56/barrel mark to remain profitable. Thus the closer we are to that number the less appealing it is for US producers.

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Technical Analysis - WTI

From a technical analysis standpoint, Oil is eyeing a clean break of a long-term descending trendline which could open up the possibility of a significant rally to the upside.

The trendline is also a confluence level as it lines up with the 200-day MA resting at the 65.00 handle.

A break of this level should in theory lead to a rally toward the 70.00 mark before the next target at 76.00 comes into view.

However, there are potential warning signs that need to be considered. Firstly the current price is almost identical to the previous swing high from August 25 which led to a selloff back to the 63.00 mark and thus a rejection here could be seen as a potential double top pattern and lead to an influx of sellers.

This make this level a key inflection point for Oil prices in the short-term and potentially the medium-term as well and should be monitored closely.

WTI Oil Four-Hour (H4) Chart, September 1, 2025

Source: TradingView (click to enlarge)

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