The price of crude oil has been oscillating sharply this week. It's been as high as $105 and now it is currently down 3%, and trading at $99 per barrel. There has been no obvious trigger for these moves, suggesting that the market cannot settle on one single narrative for where the oil price should go next.
A report earlier on Thursday showed that Saudi Arabia has recovered well from the East-West pipeline attacks and that crude shipments from the world’s largest oil producer rose to their highest levels since the start of the Iran war. This has helped to ease fears about a supply crunch, and it suggests that transits through the Strait of Hormuz are getting easier.
However, earlier this week, the oil price spiked, so we are hesitant to read into one piece of news to determine what will happen to oil prices in the short term.
Overall, the price of Brent crude has fallen 4% in the past week, and is testing the short term moving average at $99.59. This is a key support level, and if the oil price falls through here, it would suggest that from a technical point of view, there is room for further downside.
However, we also think that the shorter term moving average will act as a sticky level of support since traders may be nervous about pushing the oil price too far below $100 when there are elevated levels of geopolitical risk and there is still no ceasefire between the US and Iran.
The longer term bias remains higher for the oil price, and the longer term moving average is $103.60, which is a major resistance zone, ahead of $100.80.
Overall, the Brent crude futures price is trading in a medium term range, between $94.40, and $110.40. In the current situation, we do not think that there will be a breach to the upside or downside of this range. The RSI is also fairly neutral, which is another sign that the oil price could remain range bound.
However, if there is a ceasefire this weekend, then it is reasonable to assume that the Brent price could drop below $90, while an escalation of the fighting, or the targeting of more ships on the Strait of Hormuz, could see the oil price get back to $110.
Chart 1: The Brent crude oil price
Source: XTB. Past performance is not a reliable indicator of future results.
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