WTI Crude Oil Jumps 3% as Iran Unrest and Venezuela Shock Hit Markets; Technical Outlook
Oil prices jumped on Friday, extending Thursday's big rebound as investors looked at the growing risks of fresh supply disruptions...
Quick overview
- Oil prices surged on Friday, driven by concerns over potential supply disruptions from ongoing protests in Iran and uncertainty surrounding Venezuelan oil exports.
- Massive protests in Iran are raising fears of supply issues, with analysts highlighting the significance of a nationwide internet outage as a warning sign.
- The Biden administration is negotiating with energy producers to unlock Venezuelan oil currently hindered by sanctions, with traders closely monitoring the situation.
- Despite geopolitical tensions, analysts note that global oversupply remains a significant factor limiting oil price increases.
Oil prices jumped on Friday, extending Thursday’s big rebound as investors looked at the growing risks of fresh supply disruptions tied to the ongoing turmoil in Iran and the ever-shifting uncertainty around Venezuela’s export future. After two days of losses earlier in the week, it was back to business as usual for both benchmark oils – Brent bounced back by more than 3%, with Brent set to end the week up by nearly 3% and WTI up a bit over 1.7%.
Iran Protests Ramping up Supply Concerns
Massive protests in major Iranian cities, such as Tehran, Mashhad, and Isfahan, are now raising the spectre of supply disruptions. Analysts are warning that the nationwide internet outage is a big red flag for unrest at a national level.
Ole Hansen of Saxo Bank pointed out that “the momentum of these protests is giving people real concerns about supply, and you can hear this same concern echoed by traders who are worried about what this could mean for the whole region.
Russia added to the tension on Friday when it confirmed it had launched an Oreshnik hypersonic missile at Ukrainian energy infrastructure that is backing the country’s military operations.
Venezuelan Negotiations Add to Uncertainty
The Biden administration is going to be sitting down with energy producers and major trading houses to figure out how theyre going to get the oil from Venezuela that’s currently locked up in the country after President Nicolas Maduro got caught in the market.
Chevron, Vitol, Trafigura, and a few other major firms are going to be vying for a chunk of the inventory that’s been held up because of all the sanctions and tanker seizures – we’re talking up to 50 million barrels.
The key things that traders will be watching include:
- How the US plans to oversee the sale of that Venezuelan oil
- Whether Washington will let US refiners have long-term access to it
- The timing and structure of getting those exports back onto the market
Market strategist Tina Teng thinks “there’s going to be a lot of focus on how fast all those barrels from Venezuela get back into the global oil supplies.
There’s Still a Problem With Oversupply
Even with all the tension caused by these geopolitical issues, the world still has a lot of oil stockpiled. Analysts at Haitong Futures say that unless things in Iran get really, really bad, this rebound might not find much traction. Oversupply is still capping the upside – there’s too much oil out there.
WTI Crude Oil Technical Analysis
WTI is hovering around $58.18, stuck inside a big ol’ symmetrical triangle with a whole bunch of lower highs and higher lows. Sellers are still putting up a fight at $58.84, and buyers are still jumping in at $57.64 and $56.76 to try to keep the price from falling. This triangle is like a big magnetic field around $58.84 – no matter how much sellers try to push through, buyers keep coming back.
The price is just consolidating around the 50-day EMA ($57.45) and the 100-day EMA ($57.42) – it’s like the price has just stopped in its tracks and is saying, “I don’t know what to do now. Breaking above both of these emas would be a big deal – it would make it way more likely that this price will retest $59.55, and breaking out above the top of that triangle would be like opening the floodgates.
The relative strength index at 62 shows some real improvement, but it’s still not too high, so there’s room for the price to keep rising.
If WTI slips below $57.64, the next bearish target is $55.77 – that’s right where the triangle’s trend support level is.
Trade Idea: Buy on a break above $58.84, target $59.55, stop-loss at $57.64
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