WTI falls below $85.50 as US-Iran diplomacy hopes rise

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $85.30 during the early Asian trading hours on Tuesday. WTI falls to its lowest since August amid optimism around diplomatic efforts to end the war in the Middle East, even as attacks in the region continue. Traders brace for the American Petroleum Institute (API) weekly crude oil stock report later on Tuesday.

US President Donald Trump said over the weekend that it was “highly unlikely” he would order extensive strikes on Iran, but added that it depends on the country signing a “very strong agreement.”

On Monday, Qatari Prime Minister and Foreign Minister Sheikh Mohammed bin Abdulrahman Al Thani said that he met with Trump and Vice President JD Vance in Washington, DC, to discuss advancing talks between the US and Iran.

Al Arabiya source said that a new Qatar-Pakistan proposal would allow Washington to permit Iran to enrich uranium on its soil up to 3.67%, with Tehran agreeing to this limit. The initiative is part of efforts to relaunch negotiations between the two countries, alongside a US offer to release Iranian assets valued between $6 billion and $9 billion if an agreement is reached.

"This seems to have encouraged sellers on the prospects for peace even while the actual fighting is not slowing down," TACenergy analysts said in a note.

Elsewhere, the Houthis claimed responsibility for an attack on Sunday at Saudi oil giant Aramco's corporate office in the heart of the financial district of the capital, Riyadh. The Saudi energy ministry said that debris from the attempted attack blew out windows across several floors.

Oil volatility persists as US-Iran diplomacy remains uncertain

Analysts at Commerzbank note that oil markets "remain volatile as investors assess whether the Democrats' control of Congress could accelerate diplomatic efforts to end the US-Iran conflict." They add that "reports that Iran is reviewing proposals concerning its nuclear programme offered some encouragement, although no comprehensive agreement has been announced and risks to Gulf shipping remain," keeping sentiment fragile.

Technical Analysis: WTI turns bearish bias under the 100-day SMA

In the daily chart, the near-term bias of WTI US Oil is bearish as price holds beneath the 100-day simple moving average (SMA) and the Bollinger Bands lower band, underscoring a break below the recent volatility floor. The Bollinger Bands 20-period SMA and the upper band remain far overhead, highlighting the extent of the current pullback, while the Relative Strength Index (14) at 34.73 flirts with oversold conditions, hinting at persistent downside pressure rather than a confirmed reversal.

On the topside, initial resistance is seen at the 100-day SMA at $86.40, followed by a nearby barrier at the Bollinger Bands lower band around $86.65, forming a tight resistance cluster just above the market. Beyond that, the Bollinger mid-line at $96.35 marks a more significant structural cap, ahead of the upper band near $106.05, which defines a broader ceiling for any stronger corrective recovery. With no clear support levels derived from the provided indicators below $85.30, traders will likely look to prior price lows and psychological handles for potential demand, while the current configuration suggests rallies are prone to being sold as long as price remains below these overhead technical levels.