FUNDAMENTAL
OVERVIEW
The recent rally in oil prices has been driven by a sharp
re-escalation in the Middle East, involving once again the Strait of Hormuz. The
US carried out new strikes against Iranian targets after alleged attacks on
commercial shipping and US personnel, while Iran has threatened to disrupt Gulf
oil exports and has taken a more aggressive posture in Hormuz.
The move higher was about the increase in risk premium,
specifically about the perceived time extension of the conflict. As you recall,
at the beginning of August, it looked like things were finally starting to ease
and military actions were set aside. This week, the expectations changed as a renewed
escalation increased concern of an even longer war.
What I’m looking at now is if this is just another
temporary flare-up or a prolonged war. Trump mentioned that the recent military
campaign against Iran would not continue for “too long”, so I would
wait for signs of de-escalation to start fading this week’s rally. The downside
will still remain limited and crude oil will likely trade in a wide range above
the $80 level, but in the short-term, a de-escalation could still trigger a
nice pullback into the 87.00 support for example.
CRUDE OIL
TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that crude oil is approaching July’s high around the 93.50 level. This is where
we can expect the sellers to step in with a defined risk above the level to
position for a drop back into the 87.00 support. The buyers, on the other hand,
will look for a break to increase the bullish bets into the 97.00 handle next.
CRUDE OIL TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we
have an upward trendline defining the bullish momentum. If we get a pullback,
the buyers will likely lean on the trendline with a defined risk below it to
keep pushing into new highs. The sellers, on the other hand, will look for a
break to pile in for a drop into the 87.00 support next.
CRUDE OIL TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s
not much we can add here as from a risk management perspective, the buyers will
have a better risk to reward setup around the trendline, while the sellers will
start piling in around these levels and increase the bearish bets on a break
below the trendline. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Todaywe have Fed’s Waller speaking, the
US Jobless Claims data and the US ISM Services PMI. Tomorrow, we conclude the
week with the US NFP report. The focus will remain mainly on US-Iran
developments though.
This article was written by Giuseppe Dellamotta at investinglive.com.