FUNDAMENTAL OVERVIEW
Oil prices stabilized after last week’s sharp surge, which was driven by fears of a possible military escalation over the weekend. Attention is now turning to the third round of US–Iran nuclear talks taking place in Geneva today. Based on the developments so far, the prospects for an agreement appear slim. In fact, the signals we are getting are actually concerning.
The US has reportedly built up a significant military presence in the Middle East, the largest deployment in the region since the 2003 invasion of Iraq. According to Reuters, Saudi Arabia has prepared a contingency plan to boost short-term oil production and exports if a potential US strike on Iran were to disrupt crude flows from the region. At the same time, reports suggest that Iran is close to finalizing a deal to purchase supersonic anti-ship missiles from China, although any deployment would not be immediate.
If a military conflict were to break out, oil prices would likely spike sharply, particularly due to the risk of disruption in the Strait of Hormuz, a critical chokepoint for global energy supplies. Conversely, a clear sign of US military de-escalation or a breakthrough in negotiations between Washington and Tehran would likely be needed for prices to retreat toward the $60 level.
For now, elevated geopolitical tensions are expected to keep the oil market supported.
CRUDE OIL TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that crude oil stabilised around the 66.43 level as traders turned their focus to the third round of US-Iran nuclear talks before picking a direction. We can expect the sellers to continue to step in around the 66.43 resistance with a defined risk above it to target a drop back into the 62.36 support. The buyers, on the other hand, will look for a break higher to increase the bullish bets into the 70.50 level next.
CRUDE OIL TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we have also a mid-range support around the 64.14 level where aggressive dip-buyers could step in. The sellers, on the other hand, will look for a break below that level to increase the bearish bets into the 62.36 support next.
CRUDE OIL TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we have a minor downward trendline defining the bearish momentum on this timeframe. The sellers will likely continue to lean on the trendline with a defined risk above it to keep pushing into new lows, while the buyers will look for a break higher to pile in for a rally into new highs. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we have the third round of US-Iran nuclear talks in Geneva and the latest US Jobless Claims figures. Tomorrow, we conclude the week with the US PPI report.
