FUNDAMENTAL
OVERVIEW
Crude oil dropped further yesterday after a Kyodo
report said that Iran has offered to reopen the Strait of Hormuz within seven
days if the US lifted its blockade of Iranian ports and halted military
operations around the strait. The proposal was reportedly conveyed to
Washington through intermediaries as diplomatic efforts intensified around the
UN General Assembly. The report was later confirmed by Reuters.
Oil prices then extended the losses after Saudi Arabia
was said to be ready to resume crude oil exports from the Red Sea port of Yanbu.
Several Asian refiners have reportedly been informed by Saudi Aramco that they
will soon be able to collect crude from Yanbu again.
Fars News denied the reports of Iran offering to
reopen the Strait of Hormuz under certain conditions, but this was later
confirmed by IRIB news after US Special Envoy Witkoff met with the Iranian
delegation in New York. The US-Iran talks were described as constructive and
promising, and Trump mentioned that they scheduled another meeting in the very
near future.
Unfortunately, the timeline for the end of the
conflict remains uncertain and Trump poured some cold water on expectations of
an earlier end after he repeated that the US would make a deal with Iran after
the November elections. I think this could lead to a pullback in oil prices as traders reduce their short positions, awaiting further developments.
Trump is facing many constraints at the moment, so an
end to the war is more likely than not, but the only question is the timeline. If
the de-escalation continues and markets start to sense an earlier end, then oil
prices should continue to drift lower. Conversely, if the current US-Iran talks
fail again and we see a re-escalation, we can expect WTI oil to surge quickly
back above the $100 and weigh on the general risk sentiment.
CRUDE OIL
TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that crude oil(CFD contract) broke below
the major support zone around the 93.00 level and extended the losses below the
90.00 level. The natural target for the sellers should be the lower bound of
the channel around the 85.00 level.
If the price gets there, we
can expect the buyers to step in with a defined risk below the trendline to
position for a rally into new highs. The sellers, on the other hand, will want
to see the price breaking lower to increase the bearish bets into the 68.00
support next.
CRUDE OIL TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we
have a downward trendline defining the bearish momentum. If we get a pullback,
we can expect the sellers to lean on the trendline with a defined risk above it
to keep pushing into new lows. The buyers, on the other hand, will want to see
the price breaking higher to pile in for a rally back into the 105.00
resistance.
CRUDE OIL TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we
have a minor consolidating around the lows at the moment. The buyers will want
to see the price breaking above the 90.40 swing high to target a pullback into
the 93.00 resistance. The sellers, on the other hand, will look for a break
below the 88.70 low to extend the drop into the lower bound of the channel. The
red lines define the average daily range for today.
UPCOMING CATALYSTS
Today, we get the Flash US
PMIs, while tomorrow we have the Trump-Xi meeting. The focus will remain on
US-Iran talks.
This article was written by Giuseppe Dellamotta at investinglive.com.