Middle East Impact
Oil prices are trading sharply lower today following a reversal from the highs printed late last week as traders reacted to war breaking out between Iran and Israel. Crude futures soared to their highest level since early 2021, spiking around 20% into the highs on Friday. Fears of severe supply disruption have been the key driver of the rally in crude given the amount of output sites in the region as well as the proximity of important distribution channels such as the Strait of Hormuz.
Crude Reversing Today
However, oil prices are softening today as the conflict has so far avoided damaging any energy infrastructure (fossil fuels) and hasn’t impacted the Strait of Hormuz. If traders get the sense that the current tit-for-tat strikes wont impact crude production/distribution, oil prices should settle into a range below Friday’s highs. However, the situation remains highly volatile and oil prices are vulnerable to a sharp shift in response to any headlines that production sites or distribution channels (particularly the Strait of Hormuz) have been impacted.
FOMC on Wednesday
While the situation in the Middle East will remain the key driver for oil prices this week, traders will also be watching the latest FOMC meeting on Wednesday. No change in policy is expected, however, on the back of recent inflation and jobs weakness, traders will be looking to see if the Fed has turned any more dovish. If seen, this should pressure USD adding further support for oil prices this week.
Technical Views
Crude
The rally in crude has stalled for now into a test of the bear channel highs and the 77.69 level. Price is now retesting 72.61 from above. If bulls can hold this level as support, focus will be on a fresh push higher, in line with bullish momentum studies readings. Below here, focus turns to 67.45 as deeper support to watch.
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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.