Crude Soars Once Again

Crude prices are soaring higher today as fresh fighting between the US and Iran throws the peace process into jeopardy and dashes hopes for a reopening of the Strait of Hormuz. The US and Iran have exchanged attacks for a third consecutive day now with oil prices jumping around 13% as a result of the hostilities. US Centcom notes that it is carrying out attacks aimed at limiting Iran’s capability to strike commercial vessels. Meanwhile, The IRGC reported today that it two oil super tankers in the Strait overnight as well as continuing its attacks on US military sites in neighbouring countries. In response, Trump declared yesterday that the US would reimpose a full blockade of the Strait and charge a toll on any Iranian ships looking to pass through. The move has been aggressively criticised by Iran with fears of tensions boiling over if attacks continue.

Strait of Hormuz

Traffic through the Strait has been heavily compromised over the last week as a result of the renewed fighting. Industry data shows a roughly 50% drop in traffic over the weekend compared with a week prior. Oil prices are surging higher accordingly, and the additional fear is that the impact of the US Strategic Petroleum Reserve release is starting to fade, adding to upside pressure here and increasing the risk of a much sharper move higher. For now, risks appear firmly pointed towards higher prices unless we see a dramatic de-escalation between the US and Iran very soon.

Technical Views

Crude

The rally in crude has seen the market breaking back above the 77.65 level. Price is now fast approaching a test of the big 84.60 level. This is a key pivot for the market which, if broken, will put focus back on the 95-level next, in line with bullish momentum studies readings. To the downside, 70.76 remains the key support to watch.