FUNDAMENTAL
OVERVIEW
Since yesterday, nothing has changed fundamentally for
the oil market, but the recent bullish momentum has waned ahead of key technical
levels. Nonetheless, oil prices remain supported as the supply outlook
deteriorated further following Saudi
Arabia’s decision to shut its East-West pipeline after drone attacks.
The pipeline has been an alternative to the Strait of
Hormuz, carrying roughly 4-5 million barrels per day to the Red Sea in recent
months. Its closure therefore removes one of the few available routes for Saudi
crude exports while traffic through Hormuz remains severely disrupted.
The postponement
of planned talks between Iran and Gulf nations over a potential temporary
shipping arrangement through the Strait of Hormuz hasn’t helped the sentiment
either. With those discussions delayed, hopes for a near-term easing of the
disruption have faded.
For now, I expect oil prices to remain supported and
potentially push toward new highs unless there is meaningful progress in US-Iran
relations or a credible path toward reopening the Strait of Hormuz.
CRUDE OIL
TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that crude oil is
consolidating just below the key resistance zone around the 105.00 level. This
is where we can expect the sellers to step in with a defined risk above the
resistance to position for a drop into the lower bound of the channel around
the 85.00 level. The buyers, on the other hand, will want to see the price
breaking higher to increase the bullish bets into the 111.00 handle next.
CRUDE OIL TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we
have an upward trendline defining the bullish momentum into the resistance. If
we get a pullback, we can expect the buyers to 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 lower to increase the bearish bets into the lower
bound of the channel.
CRUDE OIL TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we
have another minor upward trendline defining the bullish momentum on this
timeframe. Yesterday, we got a pullback into it that closed the weekend gap.
The buyers leant on the trendline with a defined risk below it targeting new
highs. The sellers will want to see the price breaking below the trendline to
pile in for a pullback into the 4-hour trendline next. The red lines define the
average daily range for today.
UPCOMING CATALYSTS
Tomorrow, we have the
FOMC rate decision. On Thursday, we get the US Jobless Claims figures. Traders
will continue to keep a close eye on developments in the Middle East.
This article was written by Giuseppe Dellamotta at investinglive.com.