FUNDAMENTAL OVERVIEW
Crude oil opened with a big positive gap today after the US and Israel launched a coordinated attack over the weekend against various Iran’s targets that included key officials and military facilities. Their operation managed to kill Iran’s Supreme Leader Khamenei and many other regime officials.
Iran responded with broad attacks against Israel and US bases in various Gulf regions like Jordan, Kuwait, Bahrain, Qatar, Iraq, Saudi Arabia, and the United Arab Emirates aimed at building pressure to end the war.
The Strait of Hormuz is now virtually closed as traffic fell sharply after at least three ships were attacked. This is keeping oil prices supported despite OPEC+ decision to increase output by more than expected.
Traders are now asking themselves what comes next as that would not only decide the fate of the oil market but also of the global economy. The main risk for oil bulls is a de-escalation, as crude oil would erase quickly the recent gains much like it did last June. Conversely, a prolonged war will likely keep the market supported with 80+ prices being on the cards.
CRUDE OIL TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that crude oil opened with a big positive gap around the 75.00 level and pulled all the way back to roughly 69.00 on some profit taking before rallying back to the 73.00 level. The volatility will likely remain high amid the uncertainty. If we get a de-escalation, we can expect a quick selloff to the upward trendline around the 65.00 level. There’s not much else we can glean from this timeframe, so we need to zoom in to see some more details.
CRUDE OIL TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see the price is consolidating above the 70.00 level as traders remain uncertain on what’s next. We have a minor upward trendline defining the bullish momentum on this timeframe, which could act as support in case of a pullback. Absent a de-escalation, 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 extend the pullback into the 65.00 area next.
CRUDE OIL TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s not much we can add here as the buyers will have a better risk to reward setup around the minor trendline, while the sellers will have to wait for de-escalation signals as this remains a buyers’ market. In case, the upside momentum resumes, the buyers will look for a break above the recent high around the 75.00 level to increase the bullish bets into the 80.00 level next.
UPCOMING CATALYSTS
Today we get the US ISM Manufacturing PMI. On Wednesday, we have the US ADP and the US ISM Services PMI. On Thursday, we get the latest US Jobless Claims figures. On Friday, we conclude the week with the US NFP report. The data might not matter much this week amid the US-Iran conflict.
