Oil took a hit yesterday in the evening on media reports saying that Israel has agreed to a Gaza ceasefire proposal. However, those reports were quickly rebuffed by Qatar, who is a mediator between Israel and Hamas, saying that no agreement was reached yet. Nevertheless, Qatar said this morning that Hamas has given an 'initial positive confirmation' to the 6-week ceasefire proposal, but there is still a long and tough road to a deal. Still, there is a general feeling that talks are progressing.
On the other hand, US officials said yesterday that they have made a decision on how to respond to a recent drone strike at a US military outpost in Jordan that killed 3 US servicemen, and that the US military is preparing to strike targets in Syria and Iraq. However, the exact timing as well as scope of the retaliatory strikes remains uncertain. Should the US military not limit itself to targets in Syria and Iraq, and strike directly into Iran, it would be a massive escalation that would almost certainly trigger Iranian retaliation.
Having said that, there is a lot of risk for oil traders heading into the weekend. Potential Israel-Hamas ceasefire deal would be bearish for oil prices, while US-Iran escalation would be bullish. Nevertheless, Israel-Hamas deal does not look to be as imminent as US response to Jordan drone strike.
Taking a look at OIL chart at H1 interval, we can see that declines accelerated following a break below the neckline of the head and shoulders pattern. Price has almost reached a textbook range of the breakout from this pattern yesterday. The next major support zone to watch cane be found in the $77.25 area.
Source: xStation5
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