Threat of Broader Conflict, Sanctions Spooks Oil Markets

Weekly forecast for Brent Crude Oil, WTI Crude Oil: Bullish

• Key considerations: Iran, US sanctions, Strait of Hormuz
• Brent crude is surging towards $90 per barrel, but is $100 a possibility?
• WTI crude oil rises despite construction of large-scale EIA storage facility
• In this article’s analysis, chart pattern and the key support and resistance level. For more information, please see our comprehensive information. educational library

Key considerations: Iran, US sanctions, Strait of Hormuz

Oil prices soared on Friday ahead of Israel’s expected ground offensive on northern Gaza. Earlier in the day, Israel issued a warning to residents of northern Gaza and UN personnel working in the area to evacuate within 24 hours, a mission deemed impossible by humanitarian groups.

Iran’s foreign minister said continued crimes against Palestinians would provoke a backlash from the “remaining Axis powers”, an alliance of neighboring Arab states. Although widespread speculation about Iranian involvement has not been confirmed, oil markets rose significantly on the day as news of possible additional sanctions on Iranian oil was reported in the media.

Unless the US-brokered Israeli-Saudi relationship progresses and Saudi Arabia agrees to increase production to make up for lost Iranian supplies, the threat of sanctions will only worsen an already tight oil market. Another concern for the oil market comes through the Strait of Hormuz, which accounts for about 20% of the world’s oil supply. If a major trunk route is cut off for any reason, it could strain global oil stocks, push prices higher and reignite inflation concerns.

Brent crude oil 5 minute chart

Source: TradingView, Author richard snow

Brent crude soars towards $90 per barrel

Brent crude soared on Friday after an unsuccessful attempt to close above $87 the previous day. Oil markets experienced a turbulent period, rising on OPEC+’s new commitment to limit supply until the end of 2024 and further discretionary production cuts from Saudi Arabia and Russia, before falling on global growth concerns. did.

Trading in the oil market requires an understanding of the fundamental factors of supply and demand that drive price fluctuations. Find out what these are by reading our essential basic guide below.

During large-scale conflicts, it is always difficult to predict the scale of movements, especially in areas so critical to global oil supplies. Therefore, the area to watch for upside (resistance) emerges via the 38.2% Fibonacci retracement at $91.42, followed by the previous swing high near $95.60. Given that the oil market is emerging from a deep decline, price trends still have a considerable distance to go before entering overbought territory. If the daily and weekly closes rise above this level, immediate support appears at $89 and the swing low of $83.50 is considered as the next level.

Brent crude oil daily chart

Source: TradingView, Author richard snow

WTI crude oil rises despite construction of large-scale EIA storage facility

WTI crude oil found support at the $82.50 zone, a previous resistance level, ahead of Friday’s strong rally, rising above the significant long-term level around $86 that served as a pivot point in August, September and November of last year. .

Oil prices rose despite Thursday’s EIA crude storage statistics that revealed significant additions to existing inventories. An immediate resistance level could emerge via the recent support level (current resistance) at $88, followed by a retest of the $93 swing high.

WTI crude oil daily chart

Source: TradingView, Author richard snow

Read our analyst guide below to find out what oil will do in the final quarter of this year.

Source: IG, DailyFX, Author richard snow

Oil – US Crude Oil: 66.32% of traders are net long, according to retail trader data The trader long-to-short ratio is 1.97 to 1.

We usually take a contrarian view of crowd sentimentthe fact that traders are net buyers suggests that oil – US crude oil prices may continue to fall.

Recent changes in sentiment warn that current oil and US oil price trends could soon reverse, even though traders remain net-long.

Read our dedicated guide to contrarian indicators below to find out why daily and weekly changes in sentiment affect your trading bias.

— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnow