US/Iran Talks In Focus

Oil prices are on watch this week as markets brace for the end of the US/Iran ceasefire tomorrow. A further round of peace talks is scheduled to take place today in Pakistan between the US and Iran after Iran eventually confirmed it would send a negotiations team out. The week started on a worrying note with news that the US had seized an Iranian ship in the Strait of Hormuz, leading Iran to state that it would not be taking part in further peace talks. This was a big shift from the close on Friday where Iran stated the Strait of Hormuz was fully reopened, leading oil prices heavily lower as risk assets cheered the news.

Binary Risks For Oil

Looking ahead, the path for oil seems very clearly laid out. If negotiations progress well today and the ceasefire is extended to allow for continued talks, oil prices should fall further as markets rally and USD cools. Alternatively, if talks falter but the ceasefire is extended anyway, crude prices will likely see some ranging action and possibly a shallow drift higher. However, if talks fail and the ceasefire isn’t extended and Trump resumes US military action against Iran, oil prices stand to rebound sharply higher, along with USD, as risk markets tank. As such, there is a high degree of volatility risk over the next 24 hours as traders await news from the talks later today.

Technical Views

Crude

For now, crude prices remain above the 84.60 level but with momentum studies bearish, downside risks are seen. 77.65 will be the next support to watch if we do push lower again, while 95.06 is the level bulls need to clear to turn momentum back in their favour.