Oil Ends The Week Higher As Strait of Hormuz Tensions Rise
Oil Pushing Higher
Oil prices remain in the green today as we head into the weekend. The futures market has drifted higher over the week despite news of the ceasefire extension and ongoing negotiations. In response to previous ceasefire news we’d seen oil prices pushing heavily lower. As such, the market reaction reflects weaker confidence in the peace process given the ongoing standoff over the Strait of Hormuz and the risk of tensions bubbling over and the ceasefire collapsing. For now, while the Strait remains closed (US blockade on Iranian ships / Iranian blockade on foreign ships) oil prices will remain higher amidst constrained supply.
Strait of Hormuz Tensions
Overnight, Trump reportedly ordered a ‘shoot and kill’ policy for US navy dealing with Iranian mine-laying ships in the Strait. This comes after Trump warned there was no timeline for ending the war while Iran has warned that it will enact severe punishment on the US if the ceasefire breaks down. For now, no further peace talks scheduled and risks of violence in the Strait of Hormuz, oil risks appear skewed to the upside with the market vulnerable to a fresh surge higher in response to any incoming headlines suggesting rising tensions. In the same vein, if we hear any positive news reflecting a breakthrough in negotiations, particularly any compromise allowing to the reopening of the Strait, oil prices should unwind firmly.
Technical views
Crude
For now, oil prices continue to drift higher, fast approaching a test of the big 101.69 level with the retest of the broken bull trend line just above. This is a key area for the market which, if broken will turn focus to 114.44 as the higher target. If we slip back below 95.06, on the other hand, 84.60 will be the main 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.