Oil steadies after a drop to $64. What’s next

A lesson I’ve repeated many times was re-learned once again in the Iran-Israel-US episode and a new one was learned:

1. Never buy oil on Middle East worries, particularly if it’s already moved
2. Trump posting about lower oil prices ahead of time looks awfully suspicious, similar to his Liberation Day call on tariffs and the crypto shenanigans early in his term. The next time he says buy/sell, don’t fight it.

Finally, when guys without shirts like this are weighing in on oil, it means that the panic is already in the market and it’s time to get out.

I’m not Monday-morning quarterbacking here. Yesterday as it became clear what was unfolding I made the case for fading war worries.

“I can easily see crude dropping right back to $64 and oil companies are likely hedging aggressively today,” I wrote when crude was at $71.

It certainly got there in a hurry as today’s low as $64.00 and now we’re trading at $64.90.

Note that I also repeatedly highlighted the inverted head-and-shoulders pattern forming before it shot higher.

Now that was a $14 move in just over 36 hours so it’s time for a bit of digestion. I picked the $64 level because it’s clear on the chart where the Iran worries really started.

Aside from the extreme oversold short-term conditions, we’re now back re-testing the old highs. The momentum is strong now and OPEC+ will likely announce another large production increase in early July. That’s a tough tape to fight and the path of least resistance from here still lower and an early clue on how much lower will be dictated by how much of a bounce we get from here.

If the bulls can cling to one thing it’s that the curve isn’t in bad shape with some decent backwardation. At this point though, it’s all flows.

This article was written by Adam Button at www.forexlive.com.