Crude Sinks On Easing US/Iran Tensions
Oil Plunges
Oil prices are falling sharply midweek with crude futures down almost 5% on the day, now down around 9% from the week’s highs. The fall comes amidst signs that both the US and Iran have refrained from further escalation the rising tensions seen at the start of the week around the Strait of Hormuz. News that Iran had attacked US ships in the Strait, leading to US retaliation against Iranian fast boats sparked fears that the ceasefire was at risk of collapsing. With Trump threatening to obliterate Iran if any further attacks were seen, crude price spiked higher on Monday as a return to war looked highly likely.
Fading Tensions
However, since then, both sides have refrained from any further attacks. Indeed, on Tuesday the Iranian Foreign Minister signalled that talks between the two sides were ‘making progress’. The cooling of tensions has seen oil prices falling back accordingly with a growing view that the US is leaning on China to help persuade Iran to agree a deal and reopen the Strait of Hormuz, through which Iran sends oil to China.
Crude Inventories Due
Looking ahead today, focus will be on the latest set of EIA inventories data. Heavy drawdowns recently have been attracting attention, reflecting the increasingly scarce supply levels the US is facing. If a further drawdown is seen today (expected -3.4 million from -6.2 million) this could offer crude some support as attention starts to shift towards the risk of a bidding war breaking out for available crude.
Technical Views
Crude
Prices are now back under the $100 level, within the middle of the contracting triangle pattern which has framed the consolidation from YTD highs. 95.06 will be the next support to watch which, if broken, will open the way for a test of deeper support at the 84.60 level and triangle lows.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.