FUNDAMENTAL
OVERVIEW
Oil prices stabilized after last week’s sharp surge, which was driven by
fears of a possible military escalation over the weekend. Attention is now
turning to the third round of US–Iran nuclear talks taking place in Geneva
today. Based on the developments so far, the prospects for an
agreement appear slim. In fact, the signals we are getting are actually concerning.
The US has reportedly built up a significant military presence in the
Middle East, the largest deployment in the region since the 2003 invasion of
Iraq. According to Reuters, Saudi Arabia has prepared a contingency plan to
boost short-term oil production and exports if a potential US strike on Iran
were to disrupt crude flows from the region. At the same time, reports suggest
that Iran is close to finalizing a deal to purchase supersonic anti-ship
missiles from China, although any deployment would not be immediate.
If a military conflict were to break out, oil prices would likely spike
sharply, particularly due to the risk of disruption in the Strait of Hormuz, a
critical chokepoint for global energy supplies. Conversely, a clear sign of US
military de-escalation or a breakthrough in negotiations between Washington and
Tehran would likely be needed for prices to retreat toward the $60 level.
For now, elevated geopolitical tensions are expected to keep the oil market supported.
CRUDE OIL
TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that crude oil stabilised around the 66.43 level as traders turned their
focus to the third round of US-Iran nuclear talks before picking a direction. We
can expect the sellers to continue to step in around the 66.43 resistance with
a defined risk above it to target a drop back into the 62.36 support. The
buyers, on the other hand, will look for a break higher to increase the bullish
bets into the 70.50 level next.
CRUDE OIL TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we
have also a mid-range support around the 64.14 level where aggressive
dip-buyers could step in. The sellers, on the other hand, will look for a break
below that level to increase the bearish bets into the 62.36 support next.
CRUDE OIL TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we
have a minor downward trendline defining the bearish momentum on this timeframe.
The sellers will likely continue to lean on the trendline with a defined risk
above it to keep pushing into new lows, while the buyers will look for a break
higher to pile in for a rally into new highs. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we have the third round of US-Iran nuclear talks in Geneva and the
latest US Jobless Claims figures. Tomorrow, we conclude the week with the US
PPI report.
This article was written by Giuseppe Dellamotta at investinglive.com.