Oil recoiling as WTI retreats towards $65.00

• Oil lifting to challenge 2018's highs, but supply and Middle East tensions are hampering efforts.
• Syria's conflict could spill over into a UN spat, further affecting prices.

Crude oil is retreating from fresh highs, and WTI is back into 65.20 after reaching 65.75 in Tuesday's action.

Middle East tensions are on the rise as the conflict in Syria retakes center stage. The US has urged the UN Security Council to take action on whoever was responsible for a chemical weapons attack in a Syrian city over the weekend. Russia, an ally of Syria's embroiled President Bashar al-Assad, is vetoing any movements made by the UN against Syria, threating consequences for anyone who intervenes.

Reports of UN-allied and Russian warplane movements around Syrian borders is being reported, and the US is potentially looking into a naval support action in the region, while airline companies are being advised to steer clear of the region in case of air strikes.

Though oil enjoyed a steady uptick in risk appetite on Tuesday, the Syrian conflict and US oversupply continue to drag down oil prices. Crude oil inventories rose by 1.8 million barrels over the week to Tuesday, compared with the expected drawdown of 180,000 barrels. The US production glut is continuing to cram supply lines with more oil than they can reasonably carry.

WTI levels to watch

As FXStreet's Flavio Tosti noted earlier, "Oil has recouped last week’s losses on Tuesday and now bulls are eying the high at $66.55. The bullish momentum is strong, and next resistance ahead is seen at the $66 figure and at yearly highs at $66.66. Immediate support is seen at $65.42 swing high, followed by $64.53 demand zone."