Crude Drifting Lower on Hormuz Optimism
Crude Continues Lower
Oil prices are starting to push lower again today as optimism over the reopening of the Strait of Hormuz continues to grow. International authorities are reporting that oil flows through the Strait are starting to pick up and while negotiations between the US and Iran remain highly complex and volatile, price action in crude suggests traders are pricing in a return to normal distribution in the region with authorities reporting that safety conditions in the Strait are continuing to improve also.
US/Iran Talks
Concessions made by Trump this week in waiving sanctions against Iran, unlocking around $12 billion in frozen assets, have been seen as a strong move towards establishing a lasting peace deal between the two sides. However, there is still a standoff over nuclear inspections which could prove difficult to find a compromise on if Iran maintains that absolutely no inspections will be allowed. For now, traders await further details as talks continue with crude likely to drift deeper if headlines remain encouraging. However, the market does remain vulnerable to upside spikes in response to any breakdown in communications and/or uptick in tensions.
EIA Inventories Due
Looking ahead today we’ll also have the latest crude inventories data. The EIA is expected to report a further drawdown of 3.9 million barrels, extending the run from the prior week’s 8.3-million-barrel draw. While this would typically be bullish for crude, given the broader focus on the return of distribution through the Middle East the data is not expected to offer much support for now.
Technical Views
Crude
Crude prices continue to breakdown below the triangle pattern with price now pushing deeper below 77.65, testing next support at 70.76 If we continue deeper, 65.38 will be the next bear target to note. Near-term, the bearish outlook remains while below the 84.60 level.
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