Crude oil futures are trading sharply higher as tensions in the Middle East continue to escalate and concerns grow about the security of global oil supplies.
Yesterday, U.S. forces said they destroyed five Iranian oil tankers after Iran launched missile attacks against a U.S. warship. Iran responded by targeting a U.S. base in Jordan and threatening additional action against shipping in the Persian Gulf.
The conflict also widened after Iranian-backed Houthi forces attacked several Saudi cities and oil facilities. Overnight, Iran said it attacked 10 ships near the Strait of Hormuz—the largest wave of attacks against shipping since the war began. Iran is also threatening new maritime exclusion zones, increasing the risk of further disruptions through one of the world’s most important oil-shipping routes.
Those developments have added another geopolitical premium to crude oil, with Brent moving above $100 per barrel and WTI extending toward its early-June highs.
Fundamentally, the concerns about supply are helping to support the buyers. Technically, however, the price is also approaching some important upside targets. Those levels will help traders determine whether the buyers can remain in firm control—or whether they are becoming stretched and vulnerable to a corrective move.
So, what are the technicals telling us?
The price of crude oil futures is extending to new highs, reaching its strongest level since early June. The high price reached $96.68, well above the session low of $93.76.
The next key upside target comes against the June 3 high at $97.00. Above that sits the 61.8% retracement of the move down from the April 8 high at $98.41. If buyers can push above those levels—and stay above—the psychologically important $100-per-barrel level would not be far away.
Recall from yesterday that crude oil moved lower intraday and tested its rising 100-hour moving average near $91.80. Buyers leaned against that moving average and pushed the price sharply higher. A similar reaction occurred during Monday’s trading, increasing the technical importance of that level.
Why is that important for traders?
When a technical level holds on multiple tests, it shows that buyers are using that level to define and limit their risk. As long as the price remains above it, those buyers remain in firm control. If the level is broken, however, those same buyers may be forced to exit, opening the door for a deeper correction.
The rising 100-hour moving average is currently at $92.67. That level is just below the 50% midpoint of the decline from the early April high at $92.47. Together, those levels form an important support area.
Traders would need to see the price move back below both the 50% midpoint and the 100-hour moving average to tilt the technical bias back to the downside. Absent that, the buyers remain more in control as they target $97.00, followed by $98.41 and potentially $100.
In the video above, I take a closer look at the technical levels driving crude oil and explain what would keep the buyers in control—and what would give the sellers a reason to push back.
Be aware. Be prepared.
For other posts on crude oil see:
The oil price breakout is confirming and that’s a big problem https://investinglive.com/commodities/the-oil-price-breakout-is-confirming-and-that-s-a-big-problem/
Oil futures break above $100 as US-Iran attacks escalate. What to watch next? https://investinglive.com/commodities/oil-futures-break-above-100-as-us-iran-attacks-escalate-what-to-watch-next/
This article was written by Greg Michalowski at investinglive.com.