Iran Driven Volatility Continues

We’re seeing plenty of volatility in oil prices this week with crude futures gapping higher at the open today before reversing gains to trade deeply into the red. News flow around the Iran war remain highly changeable with conflicting signals coming almost daily for the last few weeks. Oil was initially higher in response to news of fresh attacks between the US and Iran overnight Including Iran targeting US ships in the Strait of Hormuz and warnings from Trump of heavy consequences if Iran doesn’t agree a deal in coming days. Today, however, the US has reported that it has conclude its attacks on Iran for now and will allow negotiations to resume. Against this backdrop, it’s difficult for traders to get a grasp on whether the ceasefire is slowly unravelling, heading back to war, or this is just noise as negotiations enter final stages.

Big EIA Inventories Decline

Alongside headlines out of the Middle East, the latest inventory data from the EIA yesterday showed a huge 7.2-million-barrel drawdown in crude stores. This was far deeper than the 4 million-barrel draw the market was looking for and marks the seventh straight week of inventory declines. Part of the reason for this is that refineries are likely running down stockpiles instead of sourcing new oil given the higher prices we’re seeing amidst the ongoing Middle East conflict. Looking ahead, crude price action will remain volatile with any news pointing towards a possible deal seeing rude lower and any deterioration in sentiment leading the market higher again.

Technical Views

Crude

For now, crude remains anchored against the triangle lows having broken down beneath the 95.05 level. With momentum studies bearish, risks of a further push lower are seen with 84.60 the next support to watch if we do break lower. Above 95.05, focus will turn back to the mid-triangle pivot around 101.69.