Crude Pulls Back

Crude prices have pulled back sharply at the start of the week with the futures market gapping lower on Monday. The move comes amidst news that the US has paused attacks on Iran to allow for fresh peace talks on the back of two straight weeks of fighting. In response Iran too has halted attacks, creating fresh optimism this week that the two sides are still intent on seeking a peaceful end to the conflict. Oil prices had risen more than 30% off the July lows as a result of the breakdown of the ceasefire over the last fortnight which saw heavy US strikes on Iran as well as the re-closure of the Strait of Hormuz and attacks from Iran against US military site sin neighbouring regions.

Volatility Risks

Looking ahead now, incoming headlines will be closely watched. If both sides refrain from further attacks and we news of fresh talks being scheduled this should further bolster optimism, sending oil prices lower. However, if we hear news of any renewed fighting or either side stepping back from the peace process, this should see oil prices spiking higher once again. As such, the situation remains highly volatile and near-term price action is fraught with two-way risk around incoming headlines.

Technical Views

Crude

The rally in crude has stalled for now into the 95.06 level and the underside of the broken bull trend line. Price has now turned back down to test support at the 84.60 and is back under the bearish trend line from YTD highs. Momentum studies are dropping sharply here, suggesting risks of a deeper move down to the 77.65-level now next.